A week ago, we discussed the near-convergence of the the Atlanta Fed GDPNow Forecast for third quarter GDP (then at 2.4%) with the FRBNY Nowcast forecast at 2.2%.
We have now seen convergence, and then some.
At its maximum, GDPNow was a full percentage point higher than the Nowcast. Now, the GDPNow forecast is slightly below Nowcast.
GDPNow Latest Forecast: 2.1 Percent — October 7, 2016
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 2.1 percent on October 7, down from 2.2 percent on October 5. The forecast of the contribution of inventory investment to third-quarter real GDP growth fell from 0.28 percentage points to 0.24 percentage points after this morning’s wholesale trade report from the U.S. Census Bureau. The forecast of real government spending growth fell from 0.1 percent to –0.1 percent following this morning’s employment release from the U.S. Bureau of Labor Statistics.
Huge Slide
The top to bottom decline in GDPNow went from 3.8% on August 5 to 2.1% on October 7. That’s a decline of 1.7 percentage points.
FRBNY Nowcast
As of October 7, 2016, here are the Nowcast highlights.
- The FRBNY Staff Nowcast stands at 2.2 % for 2016:Q3 and 1.3 % for 2016:Q4.
- News from this week’s data releases left the nowcast for Q3 virtually unchanged and pushed the nowcast for Q4 up slightly.
- Positive news came from international trade data as well as the manufacturing and non-manufacturing ISM business surveys.
My announced forecast was that third quarter would dip slightly while the fourth quarter would rise slightly.
Third Quarter Nowcast
The FRBNY Nowcast never got quite as exuberant as GDPNow, but as of Friday, Nowcast is higher than GDPNow for the first time in this series.
Mike”Mish” Shedlock
One of my sons has a theory that says that the moment a useful measure of the economy becomes established it looses its worthfulness because it then becomes subject to manipulation. We don’t watch these things because they actually offer good information but because, like African witch doctors throwing bones, we don’t have any better tools and we might be able to divine something out of the mess in front of us. The way I look at this stuff the augers in Rome did a better job of fending off disaster for the ancient Romans than our economic seers do today.
Something like the observer effect in there? “In physics, the term observer effect refers to changes that the act of observation will make on a phenomenon being observed. ”
That or these numbers are all just so much “character development” to add realism to the next part of the fictional story.
Good observations, teapartydoc and Mission Accomplished, to which I will overlay George Orwell’s Propaganda Ministry. Political Operatives run the Numbers Ministries at the very top levels. The Worker Drones are basically honest salaried workers and do the best possible job within the constraints and bureaucratic politics of the job. But like the IRS denying anti-socialist and teaparty groups official status, the Numbers Ministry operates in a similarly political manner. Bias or manipulations can be promulgated in subtle ways to affect the product of the Worker Drones cranking out the statistics. Think about the disappearance of M3 numbers, if anyone even remembers M3. Or the lack of government collection of civilian death statistics from USA.gov foreign interventions when Hillary was Secretary of State; uncollected numbers do not exist as data, and are therefore out of the discussion and not reality.
I place more trust in Greg’s railcar loadings data. All the rest is meaningless chatter, to bide the time until after the election when the economy will be allowed to correct and then recover in time for the next election cycle numbers to give the incumbents something to crow about. Manipulation is the name of the game. Everything is in full gear election year propaganda mode at the moment. The Old Order, which is terminally corrupt as exemplified by the Clinton Foundation, is Decaying, despite the Prez’s cheery assessments on the economy and Obamacare. Lost in all this is the gradual contraction of freedoms.
Your son should become an economist! He’s ahead of 99% of the profession already!
Even absent intentional manipulation, rational actors will look at any measure known, or suspected, to, inform policy, and adapt to game the anticipated resulting policy changes. Hence, no empirical measure of the economy will ever be of any real use, as far as informing policy goes.
Economics, of the political economy kind, will never be an empirical science, for that reason. All those who claim “someone”/the government should “manage the economy”, or even that attempting such a thing is desirable undertaking, are either complete ignoramuses, or charlatan con men. No exceptions.
Government’s role, if any, is simply to evenhandedly enforce universal laws, in a consistent fashion. Then get out of the way and let rational actors optimize as they see fit within that fixed, unalterable framework.
The federal deficit was what, 1.4 trillion dollars for fiscal year ending Oct. 1? Seems to me as if that is where the 3.5%+ 3rd quarter estimates came from, goosed election year spending.
What is coming next? Everyone is hinging on the next pronouncement from the FED or Japan or Draghi. Is or isn’t The ECB going to taper? Is Japan ending stimulus? You can hear pins drop, any time a FED member hints yes or no at the next meeting.
The quality of jobs last month was lousy. Mostly part time. Denninger mentioned that adjusted for working age population growth, effectively 60,000 jobs were lost. It has been 8 years since the last official recession began. At best, the economy is treading water.
That is funny because from my perspective we are still in the official recession from 8 years ago.
And the Fed wants to raise interest rates.
Obviously, they don’t give a rat’s ass about the ‘real economy’.
Now that their TBTF member banks are no longer benefitting from ZIRP, they need a steeper yield curve – the economy be damned.
The Fed doesn’t want to raise interest rates. They just want suckers to believe that they may sometimes want to do just that. Subsidized interest rates benefit banksters and the already wealthy and connected. Those are the folks in the Fed governors’ social and professional circles. Hence, the only ones that matter for Fed policy.
“The economy” benefits from interest rates free of manipulation. Always. Everywhere, For all time. Without a single exception whatsoever. At least until the sun goes supernova and we enter some sort of singularity.
A few months from now expect to see a slew of news stories about how spending by the Federal Government boosted the economy and the GDP in the third quarter. This would explain why the direction of the economy has been so hard to read as of late.
Economy pumping is not an uncommon practice before an election but it is important we factor in its influence when attempting to determine the true strength of the economy. Below a close look at some of the factors that will shape things going forward.
http://brucewilds.blogspot.com/2016/10/government-spending-is-boosting-growth.html