Dueling GDP Estimates: GDPNow vs. FRBNY Nowcast

Both the Atlanta Fed GDPNow and the New York Fed Nowcast updated their models today. Let’s take a look at where they stand for second-quarter GDP.

GDPNow Latest forecast: 3.7 percent — May 26, 2017

GDPNow 2nd Quarter Evolution

Nowcast Latest forecast: 2.2 percent — May 26, 2017

Nowcast Highlights

• The New York Fed Staff Nowcast stands at 2.2% for 2017:Q2.
• News from this week’s data releases reduced the nowcast for 2017:Q2 by 0.1 percentage point as the positive impact from wholesale inventories data was more than offset by the negative impact from the advance durable goods report and new home sales data.

Mish Estimate?

I have no estimate yet, other than to suggest GDPNow is way too high and Nowcast is likely high as well.

We do not have 1 month’s worth of data yet, and the construction spending and durable goods reports are notorious for heavy revisions. That said, the first quarter is not off to a rousing start, to say the least.

Second Quarter Reality

1. April Durable Goods shipments down 0.3%, new orders down 0.7%: April Durable Goods: Yet Another Weak Second-Quarter Report 
2. Wholesale Inventories: Down 0.3% in April. March revised lower from 0.2% to 0.1%.Retail Inventories: Down 0.3% in April. March revised lower from 0.5% to 0.3%. For details, please see Fed Eyes Second Quarter Recovery, Expects Trump Fiscal Policy Will Expand Economy
3. Trade deficit in April widens by 3.8% with exports down and imports up: Trade Deficit Widens, Exports Weak: Economists Miss the Mark
4. Tax Receipts: Federal Tax Receipts Running Below Expectations
5. April New Home Sales: New Home Sales Contract 11.4%: Sales Barely Up Year-Over-Year
6. April Existing Home Sales: New Home Sales Contract 11.4%: Sales Barely Up Year-Over-Year
7. April Existing Home Sales: Spring Housing Flop: Existing Home Sales Decline 2.3 Percent, Inventory Issues Persist
8. April Housing Starts: About that Strong April Recovery: Housing Starts and Permits Flop, March Revised Lower
9. April Empire State Manufacturing Survey: Empire State Manufacturing Survey Turns Negative: Welcome News?
10. April Retail Sales: Sales were at least positive (+0.4%), but they were well under economists projections: Retail Sales Disappoint Again: Department Stores Clobbered in 2017

I fail to see how we can possibly come close to 3.7% growth in the second quarter with those initial reports. GDPNow went totally off the mark with the construction spending revisions.

For a discussion of the construction spending impact, please see First Quarter GDP Second Estimate 1.2 Percent: Mish vs. Consensus and the embedded links on revisions and weather.

Mike “Mish” Shedlock