There’s an indicator I watch to determine whether or not the U.S. economy has turned the corner.
The Atlanta Federal Reserve’s GDPNow report may finally be showing strong economic growth for the U.S.
The GDPNow measure is a real-time indicator for gross domestic product (GDP) growth in the U.S. It takes data as it is released to begin to have a gauge on economic growth in the quarter.
It is extremely accurate, but only after all the data has been released.
Until it has received all the data, it fluctuates with every new data point that comes out.
That makes it also a gauge of economic expectations.
For years, the indicated provided a grim outlook for the economy as more data was released as the line sloped lower.
But so far in the latest quarter, this line is trending higher.
Strong Economic Growth
That could be a sign we are finally turning to a period of strong economic growth in the U.S.
Take a look:
The Atlanta Fed GDPNow estimate is the one we care about.
It tells us how the economy is doing compared to expectations.
The U.S. economy has had slow but steady growth of about 2% annually. Occasionally we see a strong quarter. But even in most of those relatively strong quarters, the GDPNow forecast still slopes downward.
This slope is key because it gives us a look at how the economy is doing compared to those expectations.
The indicator uses inputs based on expectations to create the estimate. The slope of the GDPNow line determines whether or not we are meeting or falling short of those inputs.
If the line doesn’t end up sloping downward, this will be the first time since 2015 that bucked the downward trend.
And it could be signaling the next economic boom coming to the U.S.
I’ll be watching it closely.
Chad Shoop, CMT
Editor, Automatic Profits Alert