Can you say…’Economic Crash’: GDP is now projected to fall nearly 53% in the second quarter, according to a Fed gauge

Jeff Cox@JEFF.COX.7528@JEFFCOXCNBCCOMKEY POINTS

• The Atlanta Fed projects that second-quarter gross domestic product will decline 52.8%.
• A continued contraction in manufacturing has been holding back consumption and private investment, two cornerstones of the economy.
• Such a big decline could portend a short-term burst but that likely will be followed by a “swoosh” recovery, said market expert Ed Yardeni.

A worker assembles an X model at the BMW manufacturing facility in Greer, South Carolina, November 4, 2019.Charles Mostoller | Reuters

Economic activity in the second quarter has been cut by more than half, according to a tracker employed by the Atlanta Federal Reserve.

The GDPNow outlook is now showing a 52.8% tumble, following data Monday that U.S. manufacturing remains firmly in decline and will weigh on investment and consumption. That data from the Institute for Supply Manufacturing showed just 43.1% of firms seeing expansion in May.

Extrapolating from that data, the Atlanta Fed anticipates personal consumption expenditures, which make up 68% of the nation’s gross domestic product, to fall 58.1% in the April-to-June period. Gross private domestic investment, which accounts for 17% of GDP, is now projected to slide 62.6%.

The GDPNow reading undergoes regular revisions and generally is more accurate as it gets closer to the end of the quarter, which in this case is June 30. The New York Fed’s GDP Nowcast, which was last updated before the ISM release, estimates a 35.5% Q2 drop, while CNBC’s Rapid Update survey of leading economists has a median 38% decline……more here

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