That’s one real-time tracker’s latest estimate for third-quarter economic growth, a fraction of the more than 6% forecasted less than three months ago and one of the starkest signs of how quickly things can change in the pandemic.
The Federal Reserve Bank of Atlanta, which uses a mathematical model for its GDPNow economic growth forecasts, said the latest economic indicators suggest real gross domestic product (GDP) will grow at an annualized rate of only 0.5% in the July-to-September quarter. The fast-shrinking estimate—as high as 6.3% in early August—was 1.2% on Friday, but then two more weaker-than-expected government reports, including on new home construction, forced it down to the 0.5%.
We won’t know how much GDP actually grew until the Bureau of Economic Analysis releases its quarterly report on Oct. 28, but estimates have been falling right and left amid signs that a summer spike in inflation and COVID-19 cases discouraged consumer spending and supply and worker shortages persisted.(Still, the Atlanta Fed’s GDPNow stands out for its pessimism.) For perspective, GDP grew at an annualized rate of 6.3% in the first quarter and 6.6% in the second.
With inflation rising 5.4% in the 12 months through September, well above the Fed’s average 2% longer-term target, a weakening economy could put the Fed in a difficult position when determining the path forward for benchmark interest rates.
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