There is a rather strong correlation between changes in the acceleration of nominal private sector debt in the U.S. and the direction of growth for the nation's real GDP growth rate. In a nutshell, we've found that "nearly 88% of periods in which the trailing twelve month average of private debt acceleration declined or was negative occurred when the U.S.' real GDP growth rate was falling", indicating that changes in the acceleration of private debt is a good predictor of the direction of GDP growth.
So what does the Federal Reserve's latest data for the change in the growth rate of private debt in the U.S. economy tell us today?
If we go by past history and assume that the momentum in 2017-Q1 will continue into 2017-Q2, there's a really strong likelihood that the U.S.' real GDP growth rate for the soon-to-be reported quarter of 2017-Q2 will have expanded over the 1.4% rate of growth that was reported for 2017-Q1.
That's it - we're going to keep the analysis short and sweet today! If however you want to know more about how and why this forecasting approach works, please follow the links below....
Data Sources
U.S. Federal Reserve. Data Download Program. Z.1 Statistical Release (Total Liabilities for All Sectors, Rest of the World, State and Local Governments Excluding Employee Retirement Funds, Federal Government). 1951Q4 - 2017Q1. [Excel Spreadsheet]. Online Database. 8 June 2017. Accessed 18 July 2017.
U.S. Bureau of Economic Analysis. Table 1.1.1. Percent Change from Preceding Period in Real Gross Domestic Product.
1947Q1 through 2015Q3 (second estimate). Online Database]. Accessed 18 July 2017.
References
National Bureau of Economic Research. U.S. Business Cycle Expansions and Contractions. [PDF Document]. Accessed 14 December 2015.
da Costa, Polyana and Ponder, Crissinda. How Fed Moves Affect Mortgage Rates. (Timeline for Federal Reserve Quantitative Easing Programs QE 1.0 through 3.0). [Online Article]. 17 September 2015. Accessed 14 December 2015.
Previously on Political Calculations
Political Calculations. The Position, Velocity and Accelration of Private Debt in the U.S.. 5 November 2015.
Political Calculations. The Correlation Between Decelerating Debt and Falling GDP. 12 November 2015.
Political Calculations. QE and the Acceleration of Private Debt in the U.S.. 18 November 2015.
Political Calculations. Private Debt Decelerates in 2015Q3, Real U.S. GDP Follows. 15 December 2015.
Political Calculations. Slowing Private Sector Debt and the Slowing Economy. 16 March 2016.
Political Calculations. Private Debt: U.S. Growth Likely Rebounding in 2016-Q2. 28 June 2016.
Political Calculations. Private Debt in U.S. Rebounds in 2016. 27 September 2016.
Political Calculations. Acceleration in Private Debt Boosts U.S. GDP. 19 January 2017.
Labels: debt, forecasting, gdp
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