A month ago, the “advanced” report on Q4 GDP showed the economy grew at a 3.3% annual rate.  Tomorrow we’ll get the second estimate.

Remember, the theme on economic growth has been “positive surprises.”  Incorporating all of the data from Q4, the consensus view from the economist community undershot by two percentage points.  The Atlanta Fed’s model undershot by about one percentage point.

If we look back at Q3, the economists were looking for a little better than 2% growth. It came in at 4.9%.

The worst offender has been the Fed.  Coming into 2023, they were looking for just 0.5% growth — for the year!  They revised it up to 2.6% by the end of December (in the Fed’s most recent Summary of Economic Projections).

At this point, it looks like they’ve still undershot by half a percentage point.

Maybe they’ve learned something from this past year?

It doesn’t seem so.

As you can see in this screenshot from the Fed’s Summary of Economic Projections, they entered 2024 looking for just 1.4% economic growth on the year.  The Atlanta Fed model is already tracking better than 3% growth for Q1.

The Fed has clearly underestimated the impact of the money supply boom on economic output.  And they’ve underestimated the sustainability of productivity gains, which increases the growth potential of the economy, without stoking inflation.