GDP: Levels and Forecast

GDP at -1.6 from the last quarter achieved a level just below the current absolute bottom at -1.7. GDP refers to Real and the RBNZ contains all data for interested. GDP also refers to annualized as the data was separated in years to run from the 1 to 10 year average. The data dates to 1990.

The Atlanta Fed GDP Nowcast reports GBP today at -1.2. My factor is -1.0 and -0.47. GDP is located in a range from -1.0 to 0.06. The Atlanta Fed Nowcast is a hodge podge of convolution as much easier and faster methods exist to arrive at a better forecast.
From -1.7 and any number in negative territory or at low positive, GDP is massively oversold from the 1 year to 10 year averages. Oversold informs GDP in subsequent quarters should be positive.

On a larger range to cover 1 to 10 year averages, the overall economy is located from -1.7 to positive 3.00’s. The problem with a positive GDP is many averages exist on the way to 3.0.

The 1 year average exists at 1.04, the 2 year at 1.62 and 5 year at 1.52 then comes a massive hurdle of averages at the 1.80’s starting at 1.80, 1.83, 1.84, 1.85. Above 1.85 only then is considered 2.18. 2.34 and 2.40.

Since 1990, GDP experienced 11 quarters of negative growth. The current quarters of negative GDP matches the crash of 2008 as the 2 worst periods since 1990. In terms of actual numbers, the current quarters are worse than the crash of 2008 by very slim margins, -3.4 Vs -3.2.

The crash of 2008 lasted for 5 consecutive and negative quarters while the current period factors to 4 successive quarters.

GDP contains a massive hurdle to achieve not only a positive number but a respectable level for economic growth. The first obstacle is 1.04 and this number is just the 1 year average. Only 9 more averages to go and much room for economic improvement on the policy front.

Historic GDP since 1990 normally trades from the 1 and 2 year averages to the 5 year. At -1.7, fails to register to normal averages.

Powell stated yesterday to economic problems are on the demand side. Opposite to Powell’s Keynesian revelations to match Bernanke and Yellen, economic problems exist on the supply side. Demand is fairly constant while supplies represent problems to shortages.

The 2nd problem and the most vital to lead GDP lower for longer is Democrats proposal to raise taxes. Trump, Reagan and Republicans of the 1920’s demonstrated lower taxes results in GDP skyrockets to 5 and 6% under Reagan and Trump while higher rates existed in the 1920’s.

Brian Twomey

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