GDPNow 4th Quarter Estimate Sinks To 2.8% From 3.3%: What Happened?

On Dec 19 the GDPNow model estimated fourth-quarter GDP at 3.3%. The forecast is now 2.8%. Let’s review the reasons.

The Atlanta Fed GDPNow Model has shown similar patterns for three quarters: High initial estimates followed by a choppy dive much lower as the quarter progresses. The reasons vary quarter to quarter but the pattern remains the same.

In contrast to GDPNow, the New York Fed Nowcast Model frequently starts the quarter low then rises.

GDPNow 4th-Quarter Forecast: 2.8% — December 22, 2017

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 2.8 percent on December 22, down from 3.3 percent on December 19.

The forecast of fourth-quarter real consumer spending growth fell from 3.1 percent to 2.9 percent after this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis (BEA).

The forecast of the contribution of inventory investment fell from -0.14 percentage points to -0.40 percentage points after this morning’s advance durable manufacturing release from the U.S. Census Bureau and the release of the revised underlying detail tables for the National Income and Product Accounts by the BEA this morning.

Nowcast 4th-Quarter Forecast: 3.9 Percent — December 22, 2017

Whereas GDPNow only forecasts for the current quarter, Nowcast forecasts two quarters.

Nowcast 1st-Quarter Forecast: 3.2 Percent — December 22, 2017

Nowcast Summary

The New York Fed Staff Nowcast stands at 3.9% for 2017:Q4 and 3.2% for 2018:Q1.

News from this week’s data releases decreased the nowcast for 2017:Q4 by 0.1 percentage point and left the nowcast for 2018:Q1 broadly unchanged.

Positive surprises from survey data and from housing data on net were offset by negative surprises from manufacturing data and by the negative impact of data revisions.

Data Impact on Nowcast