We released our second GDP and first quarter forecasts. We also have GDP+ and a guess for Q4 GDO. This graph is the CBO’s estimate of potential GDP.
figure 1: Nowcasts for GDP (blue), GDO (tan), GDP+ (teal), Atlanta Fed (red triangles) and IHS Markit/S&P Global (sky blue squares) and potential GDP (gray line), all in billions Ch.2012$ Sal. GDO estimates that corporate earnings in GDI remain unchanged at nominal levels in the third quarter of 2022. GDP+ accumulates growth rates to the fourth quarter of 2019. Source: BEA Second Edition, Federal Reserve Bank of Philadelphia, Federal Reserve Bank of Atlanta (3/1), S&P Global (3/1), CBO Budget and Economic Outlook, February 2023and the authors’ calculations.
Interestingly, even estimates of strong economic growth, such as the Atlanta Fed’s GDPNow estimate of 2.3% q/q SAAR for Q1, have failed to narrow the estimated output gap significantly.
Interestingly, the output gap turns negative following the shock of Russia’s expanded invasion of Ukraine in February 2022.
figure 2: The output gap implied by near-term forecasts for GDP (blue), GDO (tan), GDP+ (teal), Atlanta Fed (red triangles), and IHS Markit/S&P Global (sky blue squares). GDO estimates that corporate earnings in GDI remain unchanged at nominal levels in the third quarter of 2022. GDP+ accumulates growth rates to the fourth quarter of 2019. Source: BEA Second Edition, Federal Reserve Bank of Philadelphia, Federal Reserve Bank of Atlanta (3/1), S&P Global (3/1), CBO Budget and Economic Outlook, February 2023and the authors’ calculations.
Depending on the measure, the output gap is -0.4 to -0.8 percentage points of GDP through the fourth quarter of 2022. IHS Markit/S&P Global expects a recession in 2023, and its recent forecasts suggest that the output gap is widening, although the recent forecast for first-quarter growth is only marginally negative (-0.3% annualized).
