Ladies and gentlemen we are approaching convergence.
The Atlanta Fed GDPNow estimate for 3rd quarter GDP estimate took a 0.4 percentage points dive to 2.4% following today’s consumer spending report.
Meanwhile, the FRBNY Nowcast estimate for 3rd quarter remained flat at 2.2%.
GDPNow Latest forecast: 2.4 percent — September 30, 2016
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 2.4 percent on September 30, down from 2.8 percent on September 28. The forecast of third-quarter real consumer spending growth declined from 3.0 percent to 2.7 percent after this morning’s personal income and outlays report from the U.S. Bureau of Economic Analysis (BEA). Following yesterday’s GDP revision from the BEA and the Advance Economic Indicators release from the U.S. Census Bureau, the forecast of the contribution of inventory investment to third-quarter growth decreased from 0.60 percentage points to 0.26 percentage points and the forecast of the contribution from net exports increased from -0.13 percentage points to 0.13 percentage points.
Nowcast September 30, 2016 Highlights
- The FRBNY Staff Nowcast stands at 2.2% and 1.2% for 2016:Q3 and 2016:Q4, respectively.
- The net impact of the releases was small and left the nowcast virtually unchanged from last week.
- Negative contributions from real personal consumption expenditures and single family houses sold were offset by positive contributions from orders of durable goods and wholesale inventories data.
3rd Quarter Nowcast
3rd Quarter Nowcast Detail
Judging from economic reports since the last Nowcast, I expected a Nowcast reading closer to 2.0%, if not below 2.0%. What happened?
Note the highlights on inventories and durable goods new orders. It’s not that either was particularly hot. Rather, both did much better than the Nowcast model expected.
In contrast, the GDPNow components did not come in as good as its model expected. Thus we have converging models.
Inventories added 0.031 percentage points to Nowcast but GDPNow reacted like this: “the forecast of the contribution of inventory investment to third-quarter growth decreased from 0.60 percentage points to 0.26 percentage points”.
Nowcast +0.031 vs. GDPNow -0.340 (note the decimal position), on the same data. By the way, that vaunted inventory build that Econoday keeps predicting is fading into oblivion.
4th Quarter Nowcast
- 3rd Quarter GDPNow September 30: 2.4%
- 3rd Quarter Nowcast September 30: 2.2%
- 3rd Quarter Markit September 27: “Around 1.0%” (see first link below)
- Markit Chief Economist on Services Flash PMI: “Economy Growing Around 1% Again in 3rd Quarter”
- Trade Deficit Shrinks a Bit More Than Expected: Impact on GDP Estimates?
- Heavy Truck Sales vs. GDP: Sales Plunged 29% in August from Year Ago
- Conversation With Atlanta Fed on Today’s GDP Revision and Its Impact on 3rd Quarter GDP Estimates
Mike “Mish” Shedlock