# GDP Prediction for 2018Q3

#1

It’s that time again! Tomorrow, the BEA will release the initial 2018Q3 GDP estimate. I’m particularly excited about this one because it will heavily determine whether or not Trump can achieve that elusive goal that Republicans so often loved to remind us that Obama could never reach: 3% GDP growth in a calendar year. I’ll first provide what the current major models are predicting, what I predict, and then walk through some scenarios to see how likely it is that Trump will get to 3% for 2018.

2018Q3 Major Model Estimates as of 10/25/2018:

Atlanta Fed [1]: 3.6%
NY Fed [2]: 2.13%
Moody’s [3]: 3.3%

Looking at other forecasts, consensus seems to be around 3.3% for Q3. For Q4, it looks to be about 3.1.

Oh man, pretty solid numbers! So that’s 2.2, 4.2 and possibly 3.3 for the first three quarters. So what does the economy have to achieve for that coveted 3%? Let’s see: there are four quarters in a year and we kind of have an idea of what three of those quarters are. To get 3% for the year (well, we’ll go with 2.95 because they round up to one digit after the decimal for these types of announcements), we do:

2.95 * 4 = 11.8
11.8 - (2.2 + 4.2 + 3.3) = 2.1

Trump would just need 2.1% for Q4 to achieve what Obama never could!!!

But not so fast. That’s not how annual GDP growth is calculated.

That’s right, annualized GDP is calculated by doing the following:

A = average GDP over the previous year’s four quarters, chained 2012 dollars
B = average GDP over this year’s four quarters, chained 2012 dollars
C = the difference between the two averages (B - A)

Annual GDP growth = C / A

Well, how do those quarterly GDP numbers come in to play then? Let’s take a look:

Quarter GDP Quarterly Change Quarterly Growth
2017Q1 17863.023 78.838 1.79%
2017Q2 17995.150 132.127 2.99%
2017Q3 18120.843 125.693 2.85%
2017Q4 18223.758 102.915 2.33%
2018Q1 18323.963 100.205 2.22%
2018Q2 18511.576 187.613 4.16%

The quarterly growth percentages basically represent the following:

If the economy grew by the Quarterly Change amount for all 4 quarters this year, we’d have this much annual GDP growth.

For example, the annual GDP growth for 2017 was 2.2%, but if you take the average of those 2017 quarterly figures, you get 2.49%. Because remember, to get the annual growth, you have to take C from above and divide by A.

So what does C have to be for 2018 to get 2.95% (i.e. 3%) growth? Well, let’s calculate A:

A = (17863.023 + 17995.150 + 18120.843 + 18223.758) / 4
A = 18050.6935
C = 0.0295 * A
C = 532.49545825

Ok, so that’s our magic number for 2018. Let’s say we go with the Atlanta Fed’s prediction of 3.6% for Q3. That would mean we’d have a Q3 Quarterly Change of 162.4562415 (A * 0.036 / 4) or a Q3 Quarterly GDP of 18674.0322415. What do we have to achieve in Q4 to get to 2.95?

A = 18050.6935
C = B - 18050.6935
532.49545825 = ((18323.963 + 18511.576 + (18674.0322415) + (18674.0322415 + x) / 4) - 18050.6935
18583.18895825 = (18323.963 + 18511.576 + (18674.0322415) + (18674.0322415 + x) / 4
74332.755833 = (18323.963 + 18511.576 + (18674.0322415) + (18674.0322415 + x)
149.15235 = x

If we have 3.6% in Q3, we need a Quarterly Change of 149.15235 in Q4 to get 2.95% annual growth. That comes out to be 3.31% growth required in Q4.

Let’s go with the consensus of 3.3% in Q3. We’d need 3.91% in Q4 to reach our 2.95%.

Let’s go with Adroit’s prediction of 3.1% in Q3. It jumps up to 4.31%.

What say you? What do you think Q3 will bring in and what are the chances that we’ll achieve 3% annual growth this year?

Trump Getting Rid of Regulations Helps the Economy More Than Most Anything He Has Done
#2

I’m going to say 2.8%. We’ve had multiple serious weather events and there seems to be some general fear about the economy starting to slow down.

#3

It’s going to be supercalifragilisticexpialidocious.

MAGA

#4

I hate to mess up your math but I believe GDP for the first quarter this year was revised down to 2%.

#5

Negative Ghost Rider.

1st quarter 2018: 2.2 percent [1][2][3].

#6

A gentlemen’s 3.0!

My eyes are more on Google and Amazon earnings, though. If they both miss, the market’s going to slide big tomorrow.

I love how Amazon tanked earlier in the week but jumped 7% today because people decided they’re optimistic for no reason (this is why day trading=gambling, btw).

#7

Trump supporters staying away. Must be all the math. Let me try again:

Third quarter GDP is going to be the bigliest GDP. Some are saying the most growth, perhaps ever. This year will reach historic numbers. MAGA.

#8

Excellent breakdown.

I’m going to follow Atlanta’s numbers and go 3.3%. I think the inpact of the 2 hurricanes are lagging enough to affect Q4 2018.

#9

Excellent thread. Great way to kick off the predictions.

3.14

I say that because it’s just a little higher than Adroit’s prediction and because my number is not repeatable.

#10

Trump likes pie. When you’re famous, they let you…never mind.

Sorry, just trying to draw in the red hatters.

#11

both down big after earnings.
AMZN down 8% GOOG 4%
earnings were better than expected but revenue missed and AMZN’s forecast for q4 was low

#12

Yup. The low AMZN revenue guidance is a broader issue for the market, I think.

Think today’s surge in the market will be a blip in a downward trend?

#13

2%. I think people be saving their money and cashing out of equities. Plus home sales and mortgages are down with mortgage rates increasing

#14

Yup. The low AMZN revenue guidance is a broader issue for the market, I think.

Think today’s surge in the market will be a blip in a downward trend?

#15

Not a Trump supporter but this was a very nice analysis. Well done! I’ll just guess 3.2%.

#16

Just curious, but did Amazon say why they had a lower forecast for 4Q?

#17
• Net sales are expected to be between \$66.5 billion and \$72.5 billion, or to grow between 10% and 20% compared with fourth quarter 2017. This guidance anticipates an unfavorable impact of approximately 80 basis points from foreign exchange rates.

#18

There is no way that a thread this good would last in the Politics forum. It’s more convenient to shelve it over here.

How would a Trump supporter even begin to disagree–I mean, without making fools of themselves . . . again?

#19

Depends on gdp. If gdp comes in high I think the market gets smoked. A weak number and the market will be ok imho

But I could be wrong it’s happened once or twice

#20

I’m gonna go ahead and guess that because Trump didn’t spill the beans like he did last time, we might even be like 2.9.

About 20 more minutes until release.