First the bad news: The Federal Reserve Bank of Atlanta’s GDPNow model estimate for real GDP growth is 1.8% (at a seasonally adjusted annual rate), down from 2.4% on May 18. The Atlanta Fed’s “nowcast” for Q2 gross private domestic investment growth decreased from -1.8% to -4.8%, reflecting weak housing indicators.
The good news is that new orders for manufactured durable goods increased 0.4% during April to another record high. Nondefense new orders for capital goods in April increased 0.4%, also to a new record high. This series is a good indicator of business capital spending on equipment in GDP.
Overall durable goods orders expanded for the sixth time in seven months, by 0.4%m/m and 7.5% over the seven months through April—on widespread strength over the period: motor vehicles & parts (14.5%), primary metals (7.6), computers & related products (6.9), electrical equipment & appliances (5.5), machinery (4.5), communications equipment (3.3), and fabricated metals (3.1).
Looking ahead, however, May’s monthly surveys from three Federal Reserve Bank districts—New York, Philadelphia, and Richmond—were troublesome, showing orders growth stalling.
By the way, a negative reading for Q2’s GDP would suggest that the economy has been in a recession since Q1, when real GDP fell 1.4%. We expect positive Q2 growth of about 2.0%. However, we did raise our odds a recession during 2022 and 2023 from 30% to 40%.