Admittedly, early GDP readings for each quarter tend to be quite revision-prone, while many of the underlying estimates and adjustments are more art than science in the best of times. Assuming just a moderately effective fiscal multiplier (say, somewhere in the region of 0.5 – 0.75%), that would suggest that a sizeable chunk of last year’s growth surprise was due to Uncle Sam running such a large deficit. Fiscal impulses should not be confused with fiscal policy multipliers. [6]“The bottom line is that it is too early to say how much momentum to really read into those latest GDP growth figures,” argues Christian Scherrmann, U.S. economist at DWS. “No wonder that the Federal Reserve (Fed) keeps emphasizing how data-dependent its monetary policy decisions look set to remain for the foreseeable future.”[7]

Source: New York Times February 02, 2024 04:25 UTC