NGDP growth. Do I even need to comment?

(Supply shocks? I don’t think so.)

PS. The Atlanta Fed keeps winning.



48 Responses to “8.5%”

  1. Gravatar of Classical Liberal Classical Liberal
    26. October 2023 at 17:58

    You nailed it. well done! Q4? 🙂

  2. Gravatar of ssumner ssumner
    26. October 2023 at 18:12

    Classical liberal, Whatever the Atlanta Fed says (plus 3.5% inflation). They rule.

  3. Gravatar of Ryan Murphy Ryan Murphy
    26. October 2023 at 19:35

    Doesn’t nominal income growth show a much lower figure?

  4. Gravatar of ssumner ssumner
    26. October 2023 at 20:30

    Ryan, What is the Q3 figure?

  5. Gravatar of postkey postkey
    27. October 2023 at 00:13

    Who says that Keynesian economics is dead?
    “In fiscal year 2022, the US federal budget deficit was $996 billion. The just-ended fiscal year 2023 saw that figure rise to $2.02 trillion. And while those figures explain why there is no longer a scarcity of safe Treasury assets, sending long-term yields higher, they also explain the US economy’s resilience. Deficits are effectively net financial transfers from the public sector to the rest of the economy. So the US economy in 2023 has been getting a huge trillion-dollar boost in financial wherewithal because of that deficit spending. This graphic from the Congressional Budget Office gives you a sense of the difference between 2022 and 2023.
    Nothing the Fed has done will overwhelm this enormous transfer. So if you didn’t see the massive 2023 federal deficit coming — and I certainly didn’t — you wouldn’t have predicted the resiliency of the US consumer.  “?

  6. Gravatar of dlr dlr
    27. October 2023 at 02:01

    gdi is not out yet. bea never includes it in the first advanced release.

  7. Gravatar of CSK CSK
    27. October 2023 at 05:35

    “NGDP growth. Do I even need to comment?”

    I’d appreciate your comment. My guess is that you think 8.5% is way too much growth, and that the fed needs to tighten to get back on target, or indeed further to make up for past overshoots.

    Maybe I’m misunderstanding though. Maybe there was a lot of RGDP growth, and that is the thing to focus on here?

    Or maybe both, or neither.

  8. Gravatar of Rafael Rafael
    27. October 2023 at 06:52

    @dlr while we wait on real GDI, real final sales to private domestic purchasers which is a solid proxy was +3.3%, a much more reasonable value.

  9. Gravatar of ssumner ssumner
    27. October 2023 at 07:05

    CSK, Yeah, way too high. Admittedly, when averaged over the previous quarter it’s closer to 6%, but that’s still way too high.

  10. Gravatar of Kiubo Kiubo
    27. October 2023 at 10:16

    3.5% inflation is a QoQ tickup, but core PCE is still falling QoQ, isn’t that more important?

  11. Gravatar of ssumner ssumner
    27. October 2023 at 17:32

    Core PCE is good news, but NGDP growth is more important.

  12. Gravatar of David S David S
    28. October 2023 at 02:19

    They psychological effects of a sustained high inflation environment can overwhelm a mathematical reality. Some economists can’t seem to grasp this, which is why I appreciate Scott’s approach with NGDP growth rates. If I get a 5% boost in salary but see my grocery bill jump by 10% I get grumpy–never mind the fact that I’m indulging in some more luxury items.

    The implicit bargain of the Great Moderation was that I would be grumpy about not getting frequent salary bumps, but inflation was low enough to not bother me as much. A NGDP growth rate of 4% is like a gentle jog on a treadmill. Right now, many of us are sprinting on that treadmill.

  13. Gravatar of spencer spencer
    28. October 2023 at 05:09

    The party is over. The pundits treat a bank like a nonbank.

  14. Gravatar of Bobster Bobster
    28. October 2023 at 07:17

    Scott, can you explain why high ngdp is bad even though it’s mostly rgdp?

    I think people are confused on this point

  15. Gravatar of bill bill
    28. October 2023 at 08:03

    Because inflation should be countercyclical

  16. Gravatar of Solon of the East Solon of the East
    28. October 2023 at 16:57

    Is moderate inflation the end of the world? Should not the Fed just hold on to its balance sheet?

    I hope for tight labor markets to the moon. And for a couple generations at least.

  17. Gravatar of ssumner ssumner
    28. October 2023 at 17:24

    Bobster, It destabilizes the economy. Eventually the growth rate must fall to restrain inflation (real growth won’t stay at 5%.). Slowing NGDP can cause a recession. Better to keep NGDP growth near 4%.

  18. Gravatar of postkey postkey
    29. October 2023 at 00:01

    “Better to keep NGDP growth near 4%.”

    Just like that?

  19. Gravatar of ssumner ssumner
    29. October 2023 at 01:37

    Postkey, Yup.

  20. Gravatar of Michael Sandifer Michael Sandifer
    29. October 2023 at 18:24

    It’s unwise to put too much emphasis on a single data point, particularly when its data that has contradicted very similar data at times in recent years, and that is subject to large revisions.

    8.5% is obviously too high for NGDP growth, but even if this holds up, there are many indications that markets don’t expect anything like that kind of growth rate to persist.

    We do have a negative yield curve, after all, a 5 year-inflation breakeven very near the Fed’s target in core PCE terms, stock prices now 16% below the ten-year pre-pandemic trend path, earnings that are also below the pre-pandemic trend, oil futures that show significant backwardation, and a strengthening dollar index. Add to that a recent downward trend in inflation, and I see no reason to believe the current high NGDP growth will last, sans a productivity boom. Given that the Fed does inflation targeting, the Fed will probably react in a procyclical way to such a development, assuming a related decline in inflation.

  21. Gravatar of Jeff Jeff
    30. October 2023 at 00:28

    >stock prices now 16% below the ten-year pre-pandemic trend path, earnings that are also below the pre-pandemic trend

    These trends were based largely on margin expansion. Is there a story in which margins grow forever, or is that a trend that eventually has to stop?

  22. Gravatar of postkey postkey
    30. October 2023 at 01:36

    Ignorance is bliss?

  23. Gravatar of Michael Sandifer Michael Sandifer
    30. October 2023 at 02:17


    Just as with NGDP and the S&P 500 price, earnings have been on a permanently lower growth path since the Great Recession and are below their pre-pandemic growth path now. Any “margin expansion” you’re referring to is irrelevant, as it doesn’t exist, on net. I know there are people in the finanial media that like to talk about such things, but it’s just one of many meaningless discussions that take place at any given time.

  24. Gravatar of Bobster Bobster
    30. October 2023 at 13:22


    Does it make sense to say that the higher long term yields are “doing the work for the Fed”?

    I hear this a lot and it sounds like reasoning from a price change.

    Yields are up because ngdp is high. High yields won’t reduce ngdp if they are the result of high ngdp, right?

  25. Gravatar of ssumner ssumner
    30. October 2023 at 15:44

    Michael, Even the 12 month NGDP growth rate is far too high.

    Bobster, Check out my previous post.

  26. Gravatar of Michael Sandifer Michael Sandifer
    30. October 2023 at 16:00


    Yes, NGDP is above trend, which certainly is an alert about possible loose money, but it is not definitive. Can you point to a single forward-looking indicator that suggests such high NGDP growth, or above-target inflation is expected to last? All the forward indicators I see, and I’ve referred to many, indicate a slowing of growth to begin early next year, after which growth will pick up again, but will not be at unsustainable levels.

    “Market monetarism” has no meaning if there is a total lack of reliance on forward market indicators.

  27. Gravatar of Solon of the East Solon of the East
    30. October 2023 at 16:10

    Two of the key reasons that YoY inflation will likely continue to decline is wage growth has slowed (and appears likely to continue to slow), and shelter inflation will decline sharply in 2024. — Goldman Sachs

    Goldman Sachs predicts 2.4% PCE core by Dec. 24

    Meanwhile, tight labor markets are a godsend for the 100 million or so Americans in the bottom two-thirds of the labor market.

  28. Gravatar of Bobster Bobster
    30. October 2023 at 17:43

    Thanks Scott, somehow I missed your previous post.

    Unfortunately I’ve seen Fed members say exactly that. Higher rates are tightening for them

  29. Gravatar of Matt J Matt J
    31. October 2023 at 09:58

    It does seem like the Atlanta Fed does seem to be an outlier and getting things right more often. If that’s really true, how do we explain it? Are there well-known “stars” within that institution that explain its superior performance?

  30. Gravatar of postkey postkey
    1. November 2023 at 00:38

    Ignorance is bliss? The ‘power’ of the Fed.?
    ‘If “full employment” is anything under 5% unemployment and “price stability” is core inflation below the Fed’s 2% target rate then the Fed has achieved its dual mandate a whopping 3.5% of the time since 1957 when core inflation was first tracked.  Yes, you read that right.  THREE POINT FIVE PERCENT OF THE TIME.*  That means the Fed has failed to simultaneously achieve both its mandates 96.5% of the time.  I wouldn’t call that failure.  I’d say they’re not even trying. And maybe they’re not?’

  31. Gravatar of Bobster Bobster
    1. November 2023 at 10:50

    Q: To what degree did yields supplant Fed action at this meeting?

    P: we’re paying attention to yields, tightening financial conditions from yields, dollar, stocks could matter for rate decisions if persistent and not expected policy moves from the Fed

  32. Gravatar of spencer spencer
    1. November 2023 at 14:44

    ZeroHedge must read themoneyillusion:

    “The Party’s Over: Atlanta Fed Slashes Q4 GDP Estimate From 2.3% To 1.2%”

  33. Gravatar of ssumner ssumner
    1. November 2023 at 16:44

    Michael, The 10-year spread is at 2.4%, which is too high.

    Matt, I’m not sure.

    Bobster, I think the Fed is relying too much on yields slowing the economy. The economy might slow, but interest rates won’t be the reason. They don’t consistently correlate with nominal growth.

  34. Gravatar of Michael Sandifer Michael Sandifer
    2. November 2023 at 03:50


    The 10-year spread is very slightly high in core PCE terms. The 20-year breakeven was higher at 2.68% at the end of October, but the 30-year rate was 2.47% that same day.

  35. Gravatar of Michael Sandifer Michael Sandifer
    2. November 2023 at 04:10

    The yield curve is currently very nuanced with multiple inversions. That could idicate more expected volatility going forward, which could be consistent with higher mean inflation with the Fed being jerky in managing it. That said, we’re not talking about inflation being very much above target here in any case and the situation is quite fluid, with Treasuries being more volatile lately. Also, notice that nominal rates are clearly expected to go down, which would normally be consistent with lower NGDP growth.

    Here’s a nice website for viewing the yield curve by date:


  36. Gravatar of Solon of the East Solon of the East
    2. November 2023 at 08:12

    The cost of labor unexpectedly declined in the third quarter, providing at least some relief on the inflation front, the Labor Department reported Thursday.

    Unit labor costs, a measure of hourly compensation against productivity, fell 0.8% for the July-through-September period at a seasonally adjusted rate.


    Unit labor costs are falling.

    So…blah blah about inflation?

  37. Gravatar of Student Student
    2. November 2023 at 12:15

    Could be wrong but the Atlanta Fed seems more Bayesian friendly than most… hail to the Bayesians…

  38. Gravatar of Solon of the East Solon of the East
    2. November 2023 at 15:58

    Would like to see post on interest on reserves…

    When the Fed started the whole interest on reserves thing, I had reservations. Clever pun.

    Now, the Fed is paying 5.4% to commercial banks to do nothing. Sort of like paying farmers to not grow crops. Expensive too.

    Industry capture?

  39. Gravatar of Tim Tim
    2. November 2023 at 22:36

    Just place your money into open source digital currencies like BTC or Ripple (XRP), triple your money as the dollar crashes, then watch the monetary economists and their banking overlords try to ban both.

    Mainstream media will become absolutely hysterical. They will all print the same articles, with nearly identical headlines, in which they warn you about the “risks of crypto”, while begging Americans to buy worthless dollars.

    If you want to be free, sell fiat. If you want to be a slave, then buy the Fed’s closed source digital dollar coin (in progress), connected to your soon to be mandatory digital ID.

  40. Gravatar of Cmac Cmac
    4. November 2023 at 05:35

    Atlanta Fed keeps winning. Q4 GDP at 1.2% with 3.5% inflation puts us right on track at ~4-5% nominal growth

  41. Gravatar of ssumner ssumner
    4. November 2023 at 12:52

    Cmac, That’s still a bit too high.

  42. Gravatar of spencer spencer
    6. November 2023 at 08:28

    As Dr. William Barnett of Divisia Aggregates says: “The Fed should establish a “Bureau of Financial Statistics”.

    Take for example, retail money market funds. They represent nonbanks incapable of creating new money:

    “According to LSEG data, U.S. money market funds accumulated inflows amounting to a net $56.52 billion during the week, marking the most significant weekly net purchase since March 29.” – Reuters Nov. 3rd

    The sharp rise in MMMFs does not reflect an increase in the money stock, in M2. That would be double counting if those funds were not subtracted out of the DFI’s deposits. I.e., the NBFIs (nonbanks) are the DFI’s (banks) customers.

    But the transfer from bank-held savings through a nonbank is an increase in the supply of loanable bunds, but not the supply of money, a velocity relationship.

    The FED’s technical staff made the same error with MSBs:
    Link: “Toward a More Meaningful Statistical Concept of the Money Supply — Leland J. Pritchard

    The Journal of Finance
    Vol. 9, No. 1 (Mar., 1954), pp. 41-48 (8 pages)

    What’s the definition for the transaction’s velocity of money?

    “Changes in velocity have nothing to do with the speed at which money moves from hand to hand but are entirely the result of movements between demand deposits and other kinds of deposits.” — Philip George

    High interest rates & expectations of higher prices have been both cause and effect of rising rates of Vt.

    The shift in deposit accounts has fueled the increase in R-gDp in the 3rd qtr. (just like the “time bomb” in the first qtr. of 1981)

  43. Gravatar of spencer spencer
    6. November 2023 at 11:38

    The rally in bonds probably had to do with the end of filling up in the TGA.

  44. Gravatar of Michael Sandifer Michael Sandifer
    6. November 2023 at 17:41

    My YoY NGDP growth minus the concurrent S&P 500 metric which seems to represent the expected growth gap looks pretty similar to David Beckworth’s Mercatus Center Nominal GDP Gap estimate.

    The differences owe to the fact that mine represents the expected gap, rather than the past gap, and there are a few examples of an artifact in mine, which are the sharp positive spikes in the early stages of recessions.


  45. Gravatar of spencer spencer
    7. November 2023 at 07:04

    re: “rather than the past gap”

    Yeah, Beckworth’s #’s are ex-post. How’s that supposed to work?

  46. Gravatar of Michael Sandifer Michael Sandifer
    7. November 2023 at 16:29

    Well, actually I sloppily mischaracterized the charts a bit. Beckworth’s is based on professional forecaster expectations, whereas mine obviously reflects stock market expectations. Mine is not entirely forward-looking, as NGDP and Earnings are only reported quarterly.

    That said, I do have a version that’s entirely forward-looking.

  47. Gravatar of postkey postkey
    9. November 2023 at 00:36

    Suddenly, ‘they’ will start ;trying;?

  48. Gravatar of Kevin Kevin
    9. November 2023 at 16:08

    Hi Scott!

    I continue to find it a bit puzzling that you premise your judgment of the Federal Reserve’s success on whether or not they’re hitting 4% NGDP growth, which seems arbitrary considering it doesn’t actually match their commitments.

    I agree with you that an NGDPLT approach is most appropriate, but given that it’s not what we’re currently doing, isn’t judging Fed policy by that metric kind of nonsensical? If your current criticism of the Fed is that they’re estimating real GDP to come in higher the next few months than you expect, isn’t that just two parties having different guesses about the future? How can you have such confidence?

    The last thing I’ll say is that, again, given that we are not actually in an NGDPLT regime, how do decide 4%? Is that meant to correct for overshoots in the past? Or is that not something you factor in when you want the Fed to go down to 4%? If they don’t go down to 4% now, do they need to go even lower than 4% in future months to compensate?

    I’m hoping you can see that while I fully support NGDPLT for basically all the reasons you’ve espoused, I become somewhat confused about how you’re using it as a metric for judging current Fed policy. If you have a post spelling this all out, I apologize for missing it, but it’s been eating at me the last couple years.

    Thanks as always for posting as often as you do, and for dealing with all the various commenters and their eccentricities.


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