If This New Economic Forecast Is Correct, Democrats' Heads Will Explode

If the Atlanta Fed's economic forecast is accurate, the Democrats might have a more difficult 2018 than they'd hoped.

According to the Federal Reserve Bank of Atlanta's GDPNow model, the economy is going to kick off the first quarter of 2018 with a stunning 5.4% surge in GDP — which would be the most rapid growth since the end of the Great Recession in 2009, notes CNBC.

By several key economic measures, Trump's first year in office has been a big success, despite closing out with a slightly disappointing 2.6% increase in the final quarter, short of Trump's goal of at least 3% growth. If the Atlanta Fed's forecast of a 5.4% increase is even close to correct, the "Trump Boom" will be undeniable.

Here's the Atlanta Fed's explanation for its GDPNow numbers:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 5.4 percent on February 1, up from 4.2 percent on January 29. The forecast of real consumer spending growth increased from 3.1 percent to 4.0 percent after this morning's Manufacturing ISM Report On Business from the Institute for Supply Management, while the forecast of real private fixed-investment growth increased from 5.2 percent to 9.2 percent after the ISM report and this morning's construction spending release from the U.S. Census Bureau. The model's estimate of the dynamic factor for January—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data—increased from 0.42 to 1.37 after the ISM report.

While the forecast looks extremely good for the economy, CNBC notes that the Atlanta Fed has frequently overstated growth due to its model's "sensitivity" to the ISM Manufacturing Index. That index was the primary factor in its dramatic adjustment Thursday. CNBC cites a 0.8% average overstatement by the Atlanta Fed's model since 2015.

Also playing into the strong economic growth is the 4.1% unemployment rate and jobless claims at "generational lows," including in minority communities.

Another factor undoubtedly impacting the economy is the Republican-passed, Trump-signed $1.5 trillion tax cut, which slashed the corporate tax rate from 35% to 21%. In response to the massive tax savings, a growing list of corporations have announced plans to reinvest in America and American workers, including Exxon Mobil, which announced on Monday that it will invest an additional $35 billion in America. Exxon Mobil's Chairman and CEO Darren Woods specifically credited the GOP's "historic tax reform" for the decision.

For all of the companies reinvesting in their employees and the economy in response to the GOP tax reform bill, see Americans for Tax Reform's list here.

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