The Atlanta Fed’s real-time GDP tracker now shows the economy growing at just a 0.3 percent rate in the third quarter.
The GDPNOW economic barometer was at 1.5 percent until September 15, when it plunged by a full percentage point. Lowered estimates for consumer spending and business inventories were seen as responsible for dragging down the estimate.
The latest decline is due to a falling estimate of residential investment following the August housing starts data released by the Census Bureau on Tuesday. The GDP model now has housing taking 1.28 percentage points off GDP and private inventories subtracting 0.58.
The model now has consumer spending adding just under three-tenths of a percentage point, government adding 0.34, nonresidential fixed investment adding 0.43, and net exports adding 1.10.
The Atlanta Fed’s GDPNOW model is not a forecast of GDP. Instead, it is a reading of what the most recent data says about GDP. Historically, it has tended to slightly overestimate GDP. That’s particularly troubling now because it means the economy could be close to another quarterly contraction, which would be the third straight contraction.