In the wake of today’s economic reports, third-quarter GDP estimates from the Atlanta Fed GDPNow model and the New York Fed Nowcast model each plunged 0.8 percentage points.
GDPNow Forecast: 2.2 Percent — September 15, 2017
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 2.2 percent on September 15, down from 3.0 percent on September 8. The forecasts of real consumer spending growth and real private fixed investment growth fell from 2.7 percent and 2.6 percent, respectively, to 2.0 percent and 1.4 percent, respectively, after this morning’s retail sales release from the U.S. Census Bureau and this morning’s report on industrial production and capacity utilization from the Federal Reserve Board of Governors.
Nowcast Forecast: 2.2 Percent — September 15, 2017
- The New York Fed Staff Nowcast stands at 1.3% for 2017:Q3 and 1.8% for 2017:Q4.
- News from this week’s data releases reduced the nowcast for both quarters by 0.8 percentage point.
- The decrease was driven by a large negative surprise from industrial production, and to a lesser extent by a negative surprise from retail sales.
From Nowcast: “Part of the decline in manufacturing is related to Hurricane Harvey. The nowcasting model is likely to overestimate the negative impact since the platform is entirely automated and no judgmental correction is performed to account for the exceptional nature of the disruption.”
The same feature (or flaw), depending on how you see things, applies to GDPNow.
Also note that we may see a rebuilding effect (overestimating the positive impact) in subsequent quarters.
Despite ridiculous comments from Fed officials, hurricanes are a net negative to the economy. Destruction of productive assets cannot possibly benefit the economy.
- September 15: Retail Sales Unexpectedly Decline, Huge Negative Revisions in June and July: Reflections on “Bizarre” Sales Reports
- September 15: Industrial Production Dives 0.9 Percent: Economists Expected a Gain
- September 8: New York Fed President William Dudley says rate hikes will continue because Hurricane Effect will Provide a Long Run “Economic Benefit”
- August 14: NY Fed President Wants Consumers to Tap Home Equity: Didn’t We Try That Before?
Mike “Mish” Shedlock