Surging US Gold Imports Shake Up Atlanta Fed’s Estimates of GDP
The Atlanta Federal Reserve is changing its official model for calculating U.S. economic growth at the end of April, addressing concern that its current system may be painting too grim a picture.
The widely watched Atlanta Fed GDPNow model provides a running estimate of quarterly real growth in gross domestic product ahead of the official data from the Bureau of Economic Analysis. It represents a calculation of what the number would be based on the economic data available as it is released throughout each quarter, rather than offering a forecast.
In recent months, the Atlanta model has consistently shown a severe contraction of real GDP growth—as low as -3.7%—for the first quarter. That has stoked fears that the U.S. economy is heading for an imminent recession. The GDPNow model currently still estimates that first-quarter real GDP growth was -2.2%
That is significantly lower than the New York Fed Staff Nowcast of 2.58% growth. The median call among economists tracked by FactSet is for growth of 1%.
While the GDPNow model has been an accurate indicator of real GDP growth in the past, it has increasingly become an outlier this year. Both a jump in gold shipments into the U.S. that has proven difficult to calculate and retailers and companies pulling forward orders to avoid tariffs have made for a much weaker GPDNow outlook.
The BEA’s official calculation of GDP growth includes a net exports component that reflects exports minus imports and accounts for around 10% of the calculation. Gold, as an import, typically doesn’t have much of a direct impact on U.S. GDP growth. But large imports of gold do increase the trade deficit and can negatively affect GDP.
In response, Atlanta Fed researchers introduced an alternative model last month that adjusts for imports and exports of gold. As of April 17, that model estimated real GDP growth for the first quarter of -0.1%. Starting April 30, the gold-adjusted model will replace the standard model, Patrick Higgins, policy adviser and economist in the Atlanta Fed’s Research Department, said Wednesday in an update
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It is difficult to precisely forecast the impact that gold flows will have on GDP growth, in part, because of the magnitude of the recent shifts, as well as the lack of available data available from U.S. government sources and disparity in the measures of gold imports.
“A little-noticed feature of the net exports component of GDP is that it excludes the flows of gold from the export and import data. This has historically been a trivial adjustment, but in recent months is making a massive difference in the GDP implications of the merchandise trade figures,” Santander’s chief economist Stephen Stanley wrote of the situation last month.
A measure of nonmonetary gold imports spiked to a monthly average of $29.1 billion for January and February, Higgins wrote, citing data from the BEA. Before this year, the monthly value of gold imports never exceeded $9 billion in the 35 years for which the government has been tracking nonmonetary imports of gold. It had never exceeded $4 billion since 2020.
The GDPNow team, prior to March, didn’t account for the nuances of changing gold import trends. As a result, it estimated an enormous annualized drag that was only slightly offset by inventories.
“If gold imports were to fall and remain at $0 in April and thereafter, the standard model nowcast would likely understate second-quarter growth of imported goods and thereby overstate the GDP growth contribution of net exports,” Higgins wrote. “While this isn’t likely to happen, it’s also plausible that gold imports could meaningfully distort the (current) standard model’s nowcast in the second quarter—hence, the switch.”
While the standard GDPNow model does incorporate the Census Bureau’s advance inventory estimates through February 2025, Higgins said there are a number of industries—including farm, nonmerchant wholesalers, construction, and utilities—that aren’t included in the model’s estimate and do account for 20% of the total inventory stock. Gains in inventory contribute positively to GDP.
Due to this, there have been questions on whether the GDPNow model—both current and the new gold-adjusted one—is underestimating the inventories contribution.
“One could interpret this as suggesting that even the gold adjusted model forecast is a little too pessimistic,” Higgins acknowledged. “But we’ll have to wait until the official BEA report on April 30 to see if this is indeed the case.” |
