It was not at all obvious how today’s allegedly “solid” retail sales report would affect third quarter GDP estimates. As I have pointed out before, good reports do not necessarily translate that way. It all depends on what the models expected.

The FRBNY Nowcast expected a weaker retail sales report boosting its GDP estimate slightly.

However, the Atlanta Fed GDPNow Model expected a better retail report and its GDP forecast ticked lower.

GDPNow Latest Forecast: 1.9 Percent — October 14, 2016

gdpnow-2016-10-14

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 1.9 percent on October 14, down from 2.1 percent on October 7. The forecast of third-quarter real personal consumption expenditures growth fell from 2.9 percent to 2.6 percent after this morning’s retail sales report from the U.S. Census Bureau.

Nowcast October 14, 2016: Highlights

  • The FRBNY Staff Nowcast stands at 2.3% for 2016:Q3 and 1.6% for 2016:Q4.
  • Positive news from this week’s data releases pushed the nowcast up for both Q3 and Q4.
  • Higher than expected retail sales data had the largest contribution, particularly for Q4.

nowcast-2016-10-14a

Nowcast Detail for 3rd Quarter Estimate

nowcast-2016-10-14b

Retail sales added 0.042 percentage points of the 0.11 percentage point rise.

4th Quarter FRBNY Nowcast

nowcast-2016-10-14c

GDP Estimates

  • Atlanta Fed GDPNow: 1.9%
  • Markit 3rd Quarter Estimate: 1.0%
  • FRBNY Nowcast 3rd Quarter: 2.3%
  • FRBNY Nowcast 4rd Quarter: 1.6%

The 4th quarter GDP estimate for Nowcast rose from 1.32% to 1.56%. 0.133% points of the rise was due to today’s retail sales report.

For Markit’s estimate, please see Markit vs. ISM Services: Markit Economist Sticks with 1% Third Quarter GDP Estimate

For details of today’s retail sales report, please see Retail Sales Rise 0.6% In Line With Consensus.

Given the advance in retail sales was widely expected, I did not think today’s report would do too much either way to GDP model estimates.

It didn’t but in a curious way, adding to the FRBNY Nowcasts, but subtracting from GDPNow.

Related Economic Reports

Finally, please take a look at what I have been doing with Real Gross Domestic Income (RGDI) and Real Gross Private Domestic Investment (RGPDI): Real GDI, GPDI Recession Indicators Take II.

Those indicators have a huge recession warning flashing right now.

Mike “Mish” Shedlock