We have a 2nd release for GDP and nowcasts for the first quarter. We also have GDP+ and an estimate for GDO for the fourth quarter. Here’s the picture, taking the CBO’s estimate of potential GDP.
Figure 1: GDP (blue), GDO (tan), GDP+ (teal), Atlanta Fed nowcast (red triangle) and IHS Markit/S&P Global (sky blue square) and potential GDP (grey line), all in billion Ch.2012 SAAR $. The GDO estimate holds the company’s surplus in GDI constant at nominal levels in the 3rd quarter of 2022. GDP+ cumulates the growth rates until the 4th quarter of 2019. Source: BEA 2nd version, Philadelphia Fed, Atlanta Fed (3/1), S&P Global (3/1), CBO Budget and Economic Outlook, February 2023and the author’s calculations.
Interestingly, even estimates of robust economic growth, such as in the Atlanta Fed’s GDPNow estimate of 2.3% q/q SAAR for the first quarter, fail to substantially close the gap. estimated production.
Interestingly, the output gap turned negative with the shock induced by the expanded Russian invasion of Ukraine in February 2022.
Figure 2: Output gap implied by GDP (blue), GDO (tan), GDP+ (teal), Atlanta Fed Nowcast (red triangle) and IHS Markit/S&P Global (sky blue square). The GDO estimate holds the company’s surplus in GDI constant at nominal levels in the 3rd quarter of 2022. GDP+ cumulates the growth rates until the 4th quarter of 2019. Source: BEA 2nd version, Philadelphia Fed, Atlanta Fed (3/1), S&P Global (3/1), CBO Budget and Economic Outlook, February 2023and the author’s calculations.
The output gap in Q4 2022 is between -0.4 and -0.8 percentage point of GDP, depending on the measure. IHS Markit/S&P Global predicts a recession ahead in 2023, with its nowcast pointing to a widening output gap even as forecast growth is only slightly negative in the first quarter (at -0.3% annualized).