We have two revisions coming for second-quarter GDP estimates even as time rolls on. The third-quarter is already a month over. GDPNow has its first estimate, a whopping 3.7%. The GDPNow estimate is 1.7 percentage points higher than Nowcast.

GDPNow Latest Forecast: 3.7 Percent — August 4, 2017

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 3.7 percent on August 4, down from 4.0 percent on August 3. The forecasts of third-quarter real consumer spending growth and real fixed investment growth declined from 3.0 percent and 5.2 percent to 2.8 percent and 4.1 percent, respectively, after this morning’s employment report from the U.S. Bureau of Labor Statistics. The model’s estimate of the dynamic factor for July—normalized to have mean 0 and standard deviation 1 and used to forecast yet-to-be released monthly GDP source data—decreased from 0.64 to 0.27 after the report.

GDPNow Contribution Estimates

Nowcast Latest Forecast: 2.0 Percent — August 4, 2017

Nowcast Week Ending August 4, 2017 Highlights

  1. The New York Fed Staff Nowcast stands at 2.0% for 2017:Q3.
  2. News from this week’s data releases had a small positive impact on the nowcast.
  3. Positive news from the ISM manufacturing report and from labor market data was only partly offset by negative news from consumption and construction data.

Mish Comments

Once again there are wild discrepancies between the forecasts, and once again GDPNow’s initial forecast of 4% is not believable.

For the second quarter, GDPNow’s initial forecast was 4.3% (off by 1.7 percentage points). GDPNow’s final forecast was 2.6%, right on the mark.

The final Nowcast estimate for the second quarter was 2.0%. For the quarter, Nowcast never rose above 3.0%.

What tends to happen is initial forecasts from GDPNow drop over time. The models also tend towards convergence but this is a very large gap to fill.

At the moment, at least one of the models is way wrong.

Mike “Mish” Shedlock