Following yesterday’s construction spending report the GDP Now forecast dipped to 3.2 from 3.5%. Today, the GDPNow forecast bounced back to 3.5%.
Let’s start with a look at the construction report. Revisions once again make the construction report look useless.
Econoday comments on the Construction Revisions.
Oversized revisions have marred the construction spending report all year and put into question the reliability of its results. Spending was unchanged in July but June is now revised to plus 0.9 percent from an initial decline of 0.6 percent.
To be fair, construction spending on new homes, down slightly in the month and up only 1.7 percent year-on-year, is in line with housing starts where July’s year-on-year growth, in a previously released report that measures units, is 1.3 percent. Multi-family units have been the strength of the housing sector, down a monthly 0.6 percent in this report but still up 19.8 percent on the year.
Non-housing data are mixed with private nonresidential spending, led by gains in the office component, strongly higher for a second straight month and up 30 percent year-on-year. But this is offset by declines on the public side including educational building which fell sharply in the month and is down 7.3 percent on the year.
This report is very hard to assess. Back in November last year, the Census Bureau, citing a calculation error, revised 10 years of data lower. And the results since raise the question of further errors.
GDP Now 3.2 percent — September 1, 2016
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 3.2 percent on September 1, down from 3.5 percent on August 29. The forecast for third-quarter real nonresidential structures investment growth surged from –3.2 percent to 7.6 percent after this morning’s construction spending release from the U.S. Census Bureau. This was more than offset by declines in the forecasts of several other GDP subcomponents after this morning’s Manufacturing ISM Report On Business from the Institute of Supply Management.
Latest forecast: 3.5 percent — September 2, 2016
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 3.5 percent on September 2, up from 3.2 percent on September 1. The forecast of the contribution of net exports to third-quarter real GDP growth increased from –0.38 percentage points to –0.16 percentage points after this morning’s international trade release from the U.S. Census Bureau.
Mike “Mish” Shedlock