By Alice Seeley
According to the Federal Reserve Bank of Atlanta, the U.S. economy will shrink even more in the year’s second quarter. Atlanta’s Federal Reserve’s GDPNow model, which tracks economic data and adjusts daily, indicates that the economy is expected to contract by 1% in the second quarter.
The Fed has yet to release the official advance estimate of the economy’s second-quarter performance. Still, the GDPNow model combined with the economy contracting 1.6% in the first quarter means the U.S. is technically in a recession. However, the National Bureau of Economic Research, the authority on declaring a recession, clarified that two consecutive quarters of negative growth is not automatically a recession. This has not been the case since the post-1950s.
“The model’s long-run track record is excellent. Since the Atlanta Fed first started running the model in 2011, its average error has been just -0.3 points. From 2011 to 2019 (excluding the economic volatility around the pandemic), its tracking error averaged zero,” said the co-founder of DataTrek Research, Nicholas Colas.
In addition, Colas noted that U.S. Treasury has recorded the same growth rate, and “stocks have taken no comfort from the recent decline in yields because they see the same issue portrayed in the GDPNow data: a U.S. economy that is rapidly cooling.”
