All quiet on the nominal front

Little has happened to the NGDP outlook in the past week. It still looks like we’re set for about 4% nominal growth from the current quarter through to 2018Q1. This is probably about as good as we can expect in the current environment, so let’s be grateful for it. 4% nominal growth isn’t ideal, it doesn’t give employers much opportunity to cut real wages through inflation, and doesn’t do anyone who took out debt pre-2008 any favors. Yet 4% is enough to keep the economy expanding and to stave off recession.

 Barring a major change in the direction of financial market sentiment, the outlook should not change much until we get the next GDP revision, which happens on February 28. This revision will let us really nail down the GDP number for the fourth quarter, as it will contain the important Gross Domestic Income figure which is an independent but equally valid measure of final income/spending, that is to say, another way to measure GDP. So not only will the February 28 release give us a revised GDP figure, it will give us a GDI number, which will also give our modeling system more information, and potentially change the outlook.


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