I’ll link a post I made here on the Atlanta Fed numbers back in Q1 that covers it in a bit of depth
The main thing to know is that the Q4 numbers are almost entirely driven from a decrease in imports, which raises our net exports, which raises our GDP. However, imports don’t actually reduce our GDP. The reason we subtract them out is because GDP is a measure of domestic production, and the consumption, investment, and government spending numbers we use in the GDP formula include imported goods, so we have to back them out to reach the correct figure
Since the Atlanta model is a Nowcast and not a forecast, it’s not a prediction of where GDP will land, they just update the model every time new data comes in. The large decrease in imports will eventually show up in either lower consumption figures or lower inventory (a sub component of investment), but it could take time to make it’s way through those components
It was a big trend in Q1 in the opposite direction. Companies were trying to stock up on inventory before the tariffs went into effect, so we saw a huge increase in imports (which made the Atlanta model show very very low GDP). We’ve seen declining imports since that point, which skews the Atlanta model upwards
2.3% of the change was net exports: it was -0.3% last time, but this time is +2.0%. This isn't because of increased economic output or anything, but is because imports are falling. The GDP calculations subtract out imports for accounting reasons unrelated to your question, so a decline in imports with exports remaining the same would result in a GDP "spike".
After that, there was a smallish, (likely-seasonal) increase in consumer expenditures.
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I’ll link a post I made here on the Atlanta Fed numbers back in Q1 that covers it in a bit of depth
The main thing to know is that the Q4 numbers are almost entirely driven from a decrease in imports, which raises our net exports, which raises our GDP. However, imports don’t actually reduce our GDP. The reason we subtract them out is because GDP is a measure of domestic production, and the consumption, investment, and government spending numbers we use in the GDP formula include imported goods, so we have to back them out to reach the correct figure
Since the Atlanta model is a Nowcast and not a forecast, it’s not a prediction of where GDP will land, they just update the model every time new data comes in. The large decrease in imports will eventually show up in either lower consumption figures or lower inventory (a sub component of investment), but it could take time to make it’s way through those components
Can you help me understand why it’s incorrect/confusing to subtract imports?
If we exported and consumed the same amount while importing less, didn’t we produce more?
Hello, pretty new to economics. Was this a trend for the other quarters of the year because of things like tariffs, or is that only partially why?
It was a big trend in Q1 in the opposite direction. Companies were trying to stock up on inventory before the tariffs went into effect, so we saw a huge increase in imports (which made the Atlanta model show very very low GDP). We’ve seen declining imports since that point, which skews the Atlanta model upwards
2.3% of the change was net exports: it was -0.3% last time, but this time is +2.0%. This isn't because of increased economic output or anything, but is because imports are falling. The GDP calculations subtract out imports for accounting reasons unrelated to your question, so a decline in imports with exports remaining the same would result in a GDP "spike".
After that, there was a smallish, (likely-seasonal) increase in consumer expenditures.
I'm not a fan of the Atlanta Fed "GDP Now" report, for various reasons. It has been significantly wrong in the past. We should wait.
Actually, its one of the better models out there.
It's definitely better compared to others.
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