(Bloomberg) -- Wall Street might have gotten an early clue of the blockbuster expansion during the past quarter by paying more attention to the Federal Reserve Bank of Atlanta’s tracking forecast, which for several months has been pointing to 5% growth.

While the consensus of Wall Street economists in August was for 1.8% growth, the Atlanta Fed’s GDPNow model was penciling in 5% that month and maintained that level as additional data bolstered its outlook. The bank’s final forecast of 5.4% compared to the government’s first estimate of gross domestic product of a 4.9% annualized pace. Belatedly, the Wall Street consensus moved up to 4.5%.

The US economy grew at the fastest pace in almost two years last quarter, fueled by a surge in consumer spending, according to the government’s preliminary estimate Thursday.  The economy’s main growth engine — personal spending — jumped 4%, also the most since 2021. 

Much of Wall Street was “too pessimistic” and started the quarter looking for a near-term recession, said Stephen Stanley, the chief economist at Santander US Capital Markets LLC, who had predicted 5.3% for the quarter. By August, “consumption was pretty much guaranteed to be strong.”

The Atlanta Fed’s tracking model is a so-called nowcast — a running estimate created by economist Patrick Higgins that is designed to become more accurate as the quarter progresses — updated with each new piece of data such as retail sales or housing starts.

GDPNow has averaged about 50 basis points higher or lower than the initial GDP report, with somewhat less accuracy during the peak of the volatile Covid-19 period. While it’s widely cited by Wall Street economists, they are sometimes slow to update their models.

“Economists were lagging behind,” said Kathy Bostjancic, chief economist at Nationwide Mutual Insurance Co. “We all pay attention to it. We all look at it — we have our own internal models and forecasts — but everybody, even economists, will look to Atlanta’s GDPNow. That has risen to be the best GDP nowcasting estimate that’s out there.”

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