My initial idea for a blog post today was to revisit some NGDP trend graphs I had posted here back in 2014, showing that from Q1 2009, NGDP growth had followed a new, lower, stable trend. I thought it would be a really neat idea to update the dataset and take a look at how the trend might have changed given the perception of economic sluggishness amid all of the rate hike chatter and actual hiking of rates this past December with the promise of many more to come. Given the way many other indicators have played out over the last 18 months, the result was a bit surprising.
My original graphs were made using BEA as a source. Today, however, I have not been able to find that source on the BEA site. So, I have used GDP data from FRED for the new set, having compared it to the original dataset, and found them to be identical.
Since signing on to the market monetarist view of macro, my interpretation of the basic idea is that it is the trend and gap from trend is probably one of the most import aspects of stability. And what is very interesting about the updated dataset is that if NGDP growth had followed the 1Q 2009 or 1Q 2011 trends, growth would have been slower. Adding in the updated data, the trend shifts slightly upward, giving us a difference of about $100B from what my forecast program had expected.
1Q 2009 to 1Q 2016 linear trend: y = 1.6109x – 49976
1Q 2009 to 3Q 2014 linear trend: y = 1.584x – 48886
If the 3Q 2014 trend is forecast to 1Q 2016 the result is ~18100.
The actual result for 1Q 2016 is 18230
Of course this is not to say that $100B above trend is anything to write home about. It is likely nothing more than a rounding error. What it shows, however, is that the only real difference between the Bernanke and Yellen Feds is the name on the chairperson’s door. SSDD and tight as a drum.
PS: I am still wondering were all of that above target inflation that I’ve been hearing about from Fed critters as a justification for rate hikes is going to come from.
- Act now or face the inflation apocalypse. Yeah, right…