Retail Sales was released on Friday. The release impacts real consumer spending, a large component of GDP. The consumer has been driving the increase in GDP over the past few quarters. Prior to this release, the consumer spending growth was 2.0 percent. With a GDP forecast of 0.8 percent, it is easy to see that consumer spending is driving the growth in GDP.
The release on Friday dropped the consumer spending growth rate to 1.7 percent. Because of its out-sized influence, the fourth quarter GDP estimate dropped to 0.6 percent. I am starting to become alarmed, but not because of the drop in the estimate. The blue chip consensus saw an increase in the estimate for GDP as the high-end of the estimates moved up to 2.5 percent. The divergence that occurred with the Friday release of GDP Now is startling. What are other economists seeing that would result in their estimate increasing?
The next estimate will be released on Wednesday.