Back in April, the Atlanta Fed's first GDP forecast for Q2 was 4.2%. I said that was ridiculous based on the year-over-year drop in net government transfers. I said they would have to revise that lower, probably equal to Q1 GDP of 1.6% if that. And sure enough, they did...FIVE TIMES, until they got it down to 1.5%-1.6%.
Then, because of one strong retail sales report in May, they boosted it back up to 3.2%. Once again, I said they'd have to bring that down because the year-over-year drop in net government transfers had gotten worse. And sure enough, they did. Now they have it at 2.1%, which probably has to decrease even more.
I don't know what their model is, but mine is very simple, more accurate, and timely. Net government transfers are the first derivative of all economic activity.
