"while he was speaking the Atlanta federal reserve took their Q1 GDP number their estimate for 2018 down from 5.4% GDP growth down to 2.6% in only two weeks , yet the market shrugged off the Atlanta federal reserves estimate, go figure ?"
Either Mr Market is ignorant at is own peril or Trent is taking an unwaranted alarmist analyses of the
First, before arriving to conclusions it is important to realize how the Atlanta Fed’s model works. It takes newly released data like, for instance, the ISM manufacturing survey and uses that data to then project growth, based on historical correlations. That is, the Atlanta Federal Reserve has a model of the economy composed of several variables and when data from a survey arrives it changes the value assigned to one of such variables living the values of the others unchanged. Clearly that until data for all variables becomes available the estimates have to be continuously adjusted one way or another.
Second, for each variable there is a range of estimates being produced by several blue chip financial institutions leading in turn to a range of GDP forecasts.
Third, past analysis shows that the Blue Chip Consensus Forecast, which is the average of the individual forecasts, performs better than any individual one.
The above explain why the maximum forecast of real GDP growth of 5.4% was obtained on the 1st February based upon construction spending estimates and the minimum forecast of real GDP growth of 2.6% was obtained on the 27th of that same month based upon durable manufactured goods estimates.
Curiously, if you look at the consensus diraved from the multiple estimates the forecast made at the end of February is still much better than the figure shown during the whole month of January.
