Monday, June 17, 2013

GDP & the FOMC (excerpt)

At the March meeting of the FOMC, the central tendency of the members’ forecasts for real GDP was 2.3%-2.8% for this year and 2.9%-3.4% next year. Yesterday, Jon Hilsenrath predicted in a WSJ article: “If they maintain confidence in their economic forecasts, it could signal they think they're on track to begin pulling back the [QE] program later this year.”

Real GDP rose 2.4% (saar) during Q1-2013. At the March meeting of the FOMC, there was concern expressed about the impact of sequestration as “participants thought that fiscal policy was exerting significant near-term restraint on the economy.” The data show some weakness for Q2-2013, but probably not as much as was feared.

Real GDP is up 1.8% y/y through the first quarter. Excluding federal, state, and local government spending, it is up 2.7% y/y, and has been hovering around 3.0% since mid-2010. Inflation-adjusted core retail sales rose 4.3% y/y during May to another new record high. On the other hand, manufacturing production did weaken noticeably during April and May. That might reflect the impact of cuts in federal government spending that started on March 1.

Today's Morning Briefing: Reality Check. (1) The man behind the curtain. (2) Hilsenrath beating Bernanke on Google Alerts. (3) Fed gets a D-minus for communication. (4) The focus will be on FOMC’s latest economic projections. (5) FOMC statements explicitly promised to maintain NZIRP, not QE. (6) GDP muddling along. (7) Labor market improving gradually. (8) FOMC may need to lower inflation forecast. (9) Focus on IT, rated market weight. (More for subscribers.)

No comments: