The biggest economic report of President Donald Trump’s tenure is due out Friday: first quarter GDP.
The first estimate of economic growth in the first three months of the year is due out at 8:30 a.m. ET on Friday, and economists expect it will be disappointing.
According to estimates from Bloomberg, Wall Street economists forecast the economy grew at an annualized rate of 1% to start the year. In 2016, the economy grew just 1.6% for the year, the slowest pace of growth since 2011.
Researchers from the Atlanta Fed forecast the economy grew just 0.2% to start the year, while estimates from the New York Fed peg growth to start the year closer to 2.7%. President Trump pledge during the campaign that he would return the economy to 4% GDP growth.
Elsewhere in economic data, we’ll get the final reading on consumer sentiment from the University of Michigan in the morning. Consumer and business sentiment have been among the strongest economic data points since the election.
Soft GDP? Fake news.
“The data are real, but the news is fake,” writes Neil Dutta, an economist at Renaissance Macro.
Dutta concedes that first quarter GDP will be soft, but that a bad print is coming has been known. This number is, as they say, baked into the cake.
“The weakness will be driven by soft consumption and a sharp inventory drawdown. However, underlying growth is considerably stronger,” Dutta writes.
Dutta notes that housing “continues to move up and to the right,” and that business spending has picked up. All this comes against a backdrop of a Federal Reserve unlikely to raise interest rates again until its mid-June meeting.
Additionally, as we outlined on Thursday, GDP is a number that, while giving us a good snapshot of the economy, still misses a number of things happening in the economy that would make the overall economic outlook rosier.
Productivity, for instance, has been growing at 0.6% per year over the last five years, indicating that workers are simply not getting as much done.
But as Rick Rieder, Global Chief Investment Officer of Fixed Income at BlackRock, told Yahoo Finance, GDP simply does not capture technology and the changes this has wrought on the economy efficiently.
“Vehicle miles traveled are at all-time record,” he said. “Gasoline consumption, all-time record. Air miles traveled, all-time record. Auto sales running at 17.5 million cars [per year]. Meaning, the number we get through GDP, it’s just not calculated right. And it just lags what’s changed in the way that the economy works today.”
And so in short, one number is simply not comprehensive enough to capture all of the good things happening in the economy right now. And while many — including the President — will deride the services-based nature of our modern economy, it is what it is: the U.S. economy is highly levered to the services industry.
The challenge for policymakers and economists is figuring out how to best capture what works and what doesn’t in our modern economy. And GDP often falls short.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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