The New York Fed Nowcast Model for second quarter GDP rose to 2.2% from 1.7% in today’s release.
The increase was largely due to a massive jump in new home sales. Durable goods also added to the strength.
Nowcast Highlights May 27, 2016:
- The FRBNY Staff Nowcast for GDP growth in 2016:Q2 has increased for the third week in a row and stands now at 2.2%.
- Positive news came from new single family houses sold and manufacturers’ new orders of durable goods.
- This week’s second estimate of GDP growth for 2016:Q1 from the Commerce Department was 0.8%. In the advance estimate released last month, GDP growth was 0.5%. The last FRBNY Staff Nowcast for that quarter, computed before the release of the advance estimate, was 0.7%
Second Quarter Nowcast
Second Quarter Nowcast Detail
Housing, durable goods, and revisions added 0.254, 0.099, and 0.074 percentage points to the model forecast.
GDPNow, Nowcast, Markit Estimates
| Second Quarter Real GDP Forecasts | ||
|---|---|---|
| Source | Forecast | Date |
| GDPNow | 2.9% | 5/26/2016 |
| Nowcast | 2.2% | 5/27/2016 |
| Markit Composite | 0.7% | 5/25/2016 |
Related Articles
- May 24: Massive Jump in New Home Sales
- May 25: Service Sector Growth Weakest Since 2009; Markit Economist Estimates 0.7% GDP
- May 26: GDPNow Bounces to 2.9% Following Durable Goods Report
- May 20: GDPNow 2.5%, NY Fed Nowcast 1.7%; Huge Discrepancies: Why?
- May 27: US 1st Quarter GDP Revised to +0.8 Percent SAAR
In response to the amazing jump in housing starts, Nowcast rose 0.254 percentage points as noted above. GDPNow added nothing but did grow for other reasons (see link #3).
This adds to the model discrepancy confusion I noted in on May 20 (see link #4).
On May 25 (link #2) Markit chief economist Chris Williamson had this to say:
“A deterioration in the survey data for May deal a blow to hopes that the US economy will rebound in the second quarter after the dismal start to the year. Service sector growth has slowed in May to one of the weakest rates seen since 2009, and manufacturing is already in its steepest downturn since the recession. Having correctly forewarned of the near-stalling of the economy in the first quarter, the surveys are now pointing to just 0.7% annualised GDP growth in the second quarter, notwithstanding any sudden change in June.”
Today I spoke with a leading economist at the New York Fed about their model. I have already spoken with the Atlanta Fed.
I will have a writeup next week on the models.
Mike “Mish” Shedlock
Funny how all the data has turned up just in time for June FOMC ?
Micro monthly analyses tell us nothing, especially when they revise the numbers the following month. It is nothing more than diversion. Trend analyses IMO is much more telling but seldom discussed with the same furor as monthly or quarterly totals.
Indeed, and a very accurate observation.
Really more like one of these Rorschach ink blot tests (all these varied FED reports). At its next meeting, the FED will see what it wants to see in it; namely evidence of “a rising GDP trend.” Voila, justification to do what it wants to do: Surprise the markets by raising rates four times this year to prove its credibility (that it is true to its original word).
That flattening of the rate curve could indeed happen.
Do you remember the story “The Kingdom of Moltz”? Yep.
What kind of idiots are buying new homes, unless its retirees?
Michael – Chinese.
Bond Traders Say Don’t Count Out June Hike After Yellen Remarks
Yellen’s remark that the Fed will raise rates “probably in the coming months” drove benchmark two-year note yields higher for a third consecutive week. The comments at an afternoon appearance at Harvard University followed those from other Fed officials who signaled that the Federal Open Market Committee’s June 14-15 meeting is “live.”
http://www.bloomberg.com/news/articles/2016-05-28/bond-traders-say-don-t-count-out-june-hike-after-yellen-remarks
IT DOESN’T MATTER A HOOT WHAT THE FEDERAL RESERVE DOES WITH ANY OF THE THREE INTEREST RATES THEY SET as all interest rates that matter in the US economy are SET IN THE US TREASURIES MARKETS.
The only 3 rates that the Federal Reserve is involved with setting are:
1) Federal Discount Rate – currently 1.00%
2) Federal Funds Rate (which it influences) – currently in the range of 0.25% to 0.50%
3) Federal Reserve IOER (Interest On Excess Reserves) – current 0.50%
The ONLY applicability of the Federal Funds Rate is INTERBANK BORROWING to clear nightly transaction balances which is now practically NEVER UTILIZED as the banks are awash in trillions of dollars of EXCESS RESERVES and have no need to borrow from each other.
As to interest rates on savings accounts, BANKS ARE AWASH WITH EXCESS CUSTOMER DEPOSITS AT A TIME WHEN DEMAND FOR BORROWING IS VERY LOW which is why interest on savings rates is so low and that is not likely to change much.
There was indeed a rate increase on December 16, 2015 by the Federal Reserve, not that it matters the slightest bit of a hoot, and there will be a series of 2 to 4 interest rate hike in 2016.
The only 3 interest rates set by the Federal Reserve have NOTHING WHATSOEVER TO DO WITH THE INTEREST RATES ON THE US GOVERNMENT DEBT as those yields (interest rates) are all set in the $12.8 trillion a year US Treasuries market and have nothing to do with the Federal Reserve.
Dollar gains, bond prices fall after Yellen remarks
The U.S. dollar index hit a two-month high and U.S. bond prices fell on Friday after Federal Reserve Chair Janet Yellen said a U.S. interest rate hike will likely be appropriate in the coming months.
The two-year yield US2YT=RR was up more than 4 basis points at 0.911 percent, while the five-year US5YT=RR gained 4 basis points to 1.386 percent.
In the foreign exchange market, the dollar index .DXY rose 0.60 percent to 95.745, the highest level since March 29. It has surged from a low of 91.919 on May 3.
http://www.reuters.com/article/us-global-markets-idUSKCN0YI01R
I hope these idiots go ahead with their plan to raise rates. The USD strength will kill what little manufacturing is left in the US and hammer emerging markets with inflation as their currencies decline. Just in time for Trump to be elected and completely destroy the world economy with huuuuuuge trade wars. Nice.
They must have moved closer to the dart board.