The New York Fed released its GDP “Nowcast” today.
The New York Fed model expects 1.7% seasonally adjusted annualized (SAAR), a jump of 0.5 percentage points from last week.
The Atlanta Fed GDPNow Model says 2.5%.
Atlanta Fed GDPNow
Latest forecast: 2.5 percent — May 17, 2016
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.5 percent on May 17, down from 2.8 percent on May 13. The second-quarter forecast for real residential investment growth declined from 5.3 to 2.5 percent after this morning’s housing starts release from the U.S. Census Bureau, the forecast for real consumer spending growth ticked down from 3.7 percent to 3.6 percent after this morning’s Consumer Price Index release from the U.S. Bureau of Labor Statistics, and the forecast for the contribution of inventory investment to second-quarter growth declined from -0.24 percentage points to -0.39 percentage points after this morning’s industrial production release from the Federal Reserve. The latter decline was concentrated in motor vehicle and parts dealers’ inventories.
New York Fed Nowcast
- The FRBNY Staff Nowcast for GDP growth in 2016:Q2 is 1.7%, half a percentage point higher than last week.
- Positive news came from manufacturing and housing data and were only slightly offset by negative news from survey data.
Nowcast Detail
GDPNow Detail
Nowcast vs. GDPNow
Nowcast takes into consideration things GDPNow doesn’t such as JOLTS job openings, permits, and regional manufacturing surveys.
Is that valid?
Job openings can go unfilled for months or years, assuming the openings are even real. Permits are a measure of future optimism. The only activity related to permits I can think of is the cost of the permit itself.
The regional manufacturing surveys are problematic because they are diffusion indexes, not hard data. I suspect the New York Fed uses the surveys as an indication of future industrial production. That might be valid, if one could measure things properly.
The regional manufacturing weights are tiny. The Empire State weight is 0.008 and the Philly Fed weight 0.006. Nonetheless, the Empire State report knocked off 0.143 percentage points from GDP because the New York Fed’s estimate miss was huge.
Industrial Production Differences Stand Out
Industrial production and capacity utilization differences stand out.
On Tuesday, GDPNow stated “the forecast for the contribution of inventory investment to second-quarter growth declined from -0.24 percentage points to -0.39 percentage points after this morning’s industrial production release from the Federal Reserve. The latter decline was concentrated in motor vehicle and parts dealers’ inventories.”
That’s a decline of 0.15 percentage points.
The above charts show the New York Fed Nowcast model added 0.203 percentage points for industrial production and another 0.228 percentage point for capacity utilization.
One subtracts, the other adds following the same data report.
Adding seems intuitively correct with industrial production up 0.7% on the month, However, last month’s industrial production was revised from -0.6 to -0.9% so the jump was not as big as it looked.
Bloomberg Econoday reported “Vehicles, despite mostly weak sales this year, remain a central plus, up 1.3 percent in the month for a year-on-year gain of 4.3 percent which easily tops other readings in the report.”
That’s quite a different point of view compared to the GDPNow statement.
Why the Huge Differences?
I don’t know, but the deeper I dig, the more the differences stand out. I frequently find GDPNow going the opposite direction as one might expect from the data.
I have not followed the New York Fed Nowcast model close enough to offer an opinion.
I will see if I can get the Atlanta Fed and the New York Fed to comment on what I wrote above.
Confusion
The Atlanta Fed and New York Fed staffs will likely not be able to comment except on their own individual models, but perhaps the answers will help straighten some things out.
If you are confused, you are not the only one. And if you are not confused, you probably should be, unless you are not paying attention at all.
Mike “Mish” Shedlock
Do you still think we are in a recession or have you changed your mind?
Possible
Want to see the 2nd quarter numbers first – and there are huge revisions in July
some News dear to your Heart
Bloomberg just announced Judge chucked chicago pension fund case Out –
Chrysler on Thursday announced the pathetic excuse that they had cut some shifts at plants past 2 weeks due to a steering column delivery not being on time aka supply issue. Apparently somebody called them out on this as a sorry excuse since they trucks they produce at these plants where the problems ” Happen to be” have inventories at 92 day highs. . On Friday they announced 1/5 cut of all production of trucks in North America and Brazil due to excess inventory. Ford has eliminated all Super Sunday O T runs for line switch overs . 13 O T days the workers counted on gone. G M has laid off workers and cancelled runs of vehicles already this year. Yet hardly a word in the media. Inventory to sales ratio at 2nd highest ever. feds are clueless
Maybe once GDP NOW hits 12% they’ll comment?
Actually – The Atlanta Fed is very good about replying. I have written them 5 times and have an answer every time.
First contact with the research dept at NY so I cannot say.
Mish
CONfusion is always the desired result of CON artists…..
Cooking the Books much?
Just sayin’……….
Fed decisions are data driven but the data are not fact based. Atlanta and New York are not reading from the same imaginary page.
I guess they didn’t like the “data”, since they went all the way back to 205 to alter it in time for obama’s legacy.
I have always said that Economists and Weathermen are interchangeable when it comes to forecasting. This just goes to show the Fed does not know what they are doing and don’t know any more about the future than me. And I am clueless.
Since no one else wants to comment on the past why don’t we all just agree that the US dollar has been nuked and so far the only way we can monetize is to do a Yen conversion first.
Or we can become part of the Shining Path guerilla movement apparently.
Questions? Comments?
The combination of questionable input data and questionable models could only yield questionable forecasts and dicey decisions. Somehow, I suspect hiring a witch doctor to throw some bones and read the results might work just as well; though it would unemploy a lot of data gatherers, number crunchers and model makers.
Or the old coin flip method: Heads we raise, tails we lower or stay the same. All this interest rate setting to choke or stimulate the economy based on “data” makes little sense to me. What did people do in the days before the FED and other central planning politburos set interest rates? There must have existed economies prior to the creation of the FED in 1913.
RE: “I suspect hiring a witch doctor to throw some bones and read the results might work just as well…..”
Is that why economics is called the Queen of the Social Sciences?
Maybe all economics jobs should be automated………..
:::::ducking::::::
Meh. Can always roll the bones I guess.
Still…no one is expecting a tightening cycle now, yes yes?
I mean you’d have to turn your submarine 180 degrees and run her “full reverse” while firing “aft” torpedoes to believe that one.
How odd that in the age of Forward Guidance the only thing anyone can talk about is the future?
I mean seriously…”the time value of money is Yen” not some paint by numbers PhD screaming “full steam behind! Rightful Utter!” (and yes that’s what we have right now.)
So lever up 100 to 1 on Yen…convert into gold, silver and treasuries when at 8:30…is that Chicago time?..and ponder the theoretical “escape velocity” which is in fact everyone but you and me abandoning this sinking ship called “Recovery.”
No there won’t be any “magical driverless semi’s” to save us either as that industry has already collapsed. “They’re called Railroads” folks.
Move along…
It’s an election year, you don’t think Janet wants trump elected to you