On Tuesday, Chicago Fed President Austin Goolsbee cautioned about the economy, stating that he sees signs of weakening in the real economy. Despite previously discussing the potential for a ‘golden path’ or soft landing, Goolsbee now seems more hesitant, acknowledging that it is still a possibility. As a dove, he is among the first to point out concerns about economic growth.
Two key charts support Goolsbee’s outlook on the economy. The first chart, the Bloomberg US economic surprise index, shows that economic data has consistently fallen short of consensus expectations, with the recent ISM services number significantly undershooting projections. This led the index to drop to a nine-year low, suggesting that economists may have been too optimistic about growth.
The second chart, Atlanta Fed’s GDPNow tracker for Q2 growth, also paints a concerning picture. With just three weeks until the first reading on GDP, the tracker has been slashed in half to 1.5%, indicating a significant downward revision in growth expectations for the quarter. As we await more corporate feedback on a demand slowdown, the upcoming non-farm payrolls report on Friday will be a crucial indicator of the economy’s health.
