The spread between the Atlanta Fed GDPNow model and the New York Fed Nowcast model narrowed a bit today. About one percentage point separates the models.

GDPNow Forecast: 3.2 percent — September 1, 2017

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 3.2 percent on September 1, down from 3.3 percent on August 31. The forecasts of third-quarter real consumer spending and nonresidential equipment investment growth increased from 2.8 percent and 6.1 percent to 3.0 percent and 7.1 percent, respectively, after this morning’s Manufacturing ISM Report On Business from the Institute for Supply Management and the employment report from the U.S. Bureau of Labor Statistics. The model’s estimate of the dynamic factor for August—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data—increased from 0.11 to 0.41 after the reports. These increases were more than offset by declines in the forecasted growth rates of real government spending and real nonresidential structures investment from 0.2 percent and 2.6 percent to -0.7 percent and -3.3 percent, respectively, after the employment report and this morning’s construction spending release from the U.S. Census Bureau.

Nowcast forecast: 2.2 percent — September 1, 2017

  • The New York Fed Staff Nowcast stands at 2.2% for 2017:Q3.
  • News from this week’s data releases increased the nowcast by 0.3 percentage point.
  • Positive news from the ISM manufacturing report accounted for most of the increase.

Key Points

  • As with the Fed regional reports, ISM has not tracked actual industrial output.
  • Once again GDPNow’s initial forecast has been hugely positive only to decline as more data comes in.
  • The divergence between the reports is a still wide but has narrowed considerably.

Mike “Mish” Shedlock