Just before the aborted Santa Rally took off in earnest, on December 23 the famous US economic growth prognosticators at the Atlanta Fed (famous because unlike Wall Street they actually are right) slashed its Q4 GDP forecast from 1.9% to 1.3% citing weakness in real consumer spending and poor existing-home sales.
Moments ago, in its latest Q4 GDP revision, the Atlanta Fed just pulled the rug from under the economy (and the market now that bad news for the economy is bad news for stocks), and slashed its latest quarterly forecast by another 50%, from 1.3% to a barely positive 0.7%, a print which matches the "abysmal" Q1 2015 GDP, which as a reminder had to be double seasonally adjusted higher to compensate for the "harsh winter."
Does that mean that when "triple seasonally adjusting" for warm weather that the real Q4 GDP was negative?
This is what the Atlanta Fed said:
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 0.7 percent on January 4, down from 1.3 percent on December 23. The forecast for the contribution of net exports to fourth-quarter real GDP growth fell 0.1 percentage points to -0.4 percentage points on December 29 after the U.S. Census Bureau's advance report on international trade in goods. The nowcast for real GDP growth fell 0.5 percentage points this morning following the Census Bureau's release on construction spending and the Institute for Supply Management's Manufacturing ISM Report On Business.
Said otherwise, according to the Atlanta Fed, Janet Yellen launched a rate hike cycle in a quarter when GDP will be just 0.7%, and which when averaged across the prior 3 quarters, would mean that the US will have grown at just 1.8% in 2015, a 25% drop from the 2.4% GDP growth in 2014.
Perhaps this is indicative of the Fed's new normal thinking: the lower the GDP print, the higher the Fed Funds rate?