The large divergence between the Atlanta Fed GDPNow forecast and the New York Fed Nowcast remains.

The former upped its forecast today from 3.2% to 3.5% while the Nowcast remains at 2.8% from a week ago.

In addition, the initial Nowcast for 4th quarter is a not so robust 2.0%.

Nowcast September 2, 2016 Highlights

  • The FRBNY Staff Nowcast stands at 2.8% for 2016:Q3, unchanged from last week.
  • The Nowcast for 2016:Q4 is around 2%.
  • News from this week’s data releases provided mixed signals. The largest negative contributions came from a lower than expected ISM manufacturing release and lower than expected imports. Positive contributions came from higher than expected consumer spending and exports.

3rd Quarter Nowcast vs GDPNow

Nowcast 2016-09-02A

GDPNow updates far more frequently, but has not started to project 4th quarter. I did not place all the data points for GDPNow.

Nowcast 3rd Quarter Detail

Nowcast 2016-09-02B

Nowcast 4th Quarter Forecast

Nowcast 2016-09-02C

3rd Quarter Forecasts

For the sake of argument let’s assume the FRBNY forecasts are accurate. The last five quarters would look like this.

  • 4th Quarter 2015: 0.9%
  • 1st Quarter 2016: 0.8%
  • 2nd Quarter 2016: 1.1%
  • 3rd Quarter 2016: 2.8%
  • 4th Quarter 2016: 1.7%

Does that look like hike material?

Just so no one gets me wrong. I am not suggesting the Fed shouldn’t hike.

Rather, I am suggesting there should not be a Fed at all. The market should set rates. If it did, we would not be in this mess.

Mike “Mish” Shedlock