Reality GDP
Submitted by Atlas Indicators Investment Advisors on March 15th, 2018
“It would not be much of a universe if it wasn't home to the people you love.” – Stephen Hawking
As you have probably heard by now, theoretical physicist Stephen Hawking died in Cambridge, England on Wednesday. I find it poetic that he passed on Pi day, March 14 (3.14). His life’s work was dedicated to mathematically explaining reality, an endeavor Archimedes influenced when he discovered the ratio of a circle’s circumference and its diameter.
Economists attempt to explain economic reality using a very simple equation: C+I+G+N = Gross Domestic Product (GDP). Each quarter estimates for Consumption, Investment, Government Outlays, and Net Exports are added together to quantify the growth rate of our nation’s output. However, America is roughly a $20 trillion economy filled with an unknowable number of variables, so the statistics created cannot truly represent reality. Forget accurately predicting quarterly outcomes, economists are doing ok if they can determine whether our economy is getting better or worse. Newtonian physics refers to this as accelerating and decelerating.
Many of Atlas’ recent notes have included references to deceleration. This one will do the same. On Pi day 2018, the Federal Reserve Bank of Atlanta published an updated iteration of their GDPNow forecast. It now expects a considerable deceleration in output for the current quarter; this estimate went from 2.5 percent on March 9th to 1.4 percent on Wednesday. If this forecast comes to fruition, America’s output will have decelerated for a second consecutive quarter. Click here for Atlas’ note on revised GDP from the fourth quarter of 2017.
Recent decelerations have not been pronounced enough to worry about a recession, but their persistence is increasing. Atlas will continue monitoring the universe of economic indicators, pointing out the factoids we find most compelling. Atlas is dedicated to increasing our clients’ understanding of the economy without using too many Greek symbols, but with the death of Stephen Hawking, π seems appropriate for this space and time.
