Federal Reserve Bank of Atlanta Forecast 5.4% Growth in the US Economy

The updated forecast of the Atlanta Fed shows that US economy is progressing to reach significant figures for the growth in the first quarter. The gross domestic product (GDP) is projected to grow by 5.4 percent as 2018 begins, according to the economic outlook by the central bank branch. If the predicted forecast happens, this would be regarded the most excellent quarter since the Great Recession in 2009. The previous highest recorded was 5.2 percent of Q3 2014.

However, the wage growth tracker of Atlanta Fed indicates some issues regarding in the past, particularly, its sensitivity towards the ISM manufacturing index which showed repeated errors and overstated forecasts. In 2015, the Atlanta Fed had a misreport for the ISM growth, indicating a 0.8 percentage point on average and 1.9 percentage points in the last three months on November 1st, based on the CNBC calculations. The figures of ISM serves as the major driver to further increase growth predictions.

This occurred along with the unemployment claims remained unchanged in the generational lows and jobless rate came in at 4.1 percent. On one hand, the productivity continued to have a weak stance and fell to 0.1 percent during the 4th quarter versus the expected growth of 1 percent.

While real consumer spending rose to 4 percent versus the 3.1 percent in the past, it took place despite the steep decline in savings along with the expansion of private fixed-investment from 5.2 percent to 9.2 percent.

The GDP for Q4 was 2.6 percent, which was driven primarily by the downturn in inventories coupled with the boost of imports and temporary setbacks are projected to reverse in the next quarters. US President Donald Trump rode to office with false promises that economic growth would reach at least 3 percent and surge as high as 6 percent. The Atlanta Fed also had an optimistic outlook for first quarter of 2017, with an estimated growth at 3.4 percent and the final reading led to 1.2 percent.