GDPNow Dives Following Jobs, ISM Report: Little Reaction in Nowcast

The Atlanta Fed GDPNow Forecast for fourth-quarter GDP took a half-percentage-point dive following today's economic reports.

GDPNow Forecast: 2.7% - January 5, 2018

• The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 2.7 percent on January 5, down from 3.2 percent on January 3.
• The forecasts of real consumer spending growth and real private fixed-investment growth decreased from 3.2 percent and 8.9 percent, respectively, to 3.0 percent and 7.6 percent, respectively, after this morning's employment report from the U.S. Bureau of Labor Statistics and this morning's Non-Manufacturing ISM Report On Business from the Institute for Supply Management.
• The model's estimate of the dynamic factor for December—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data—fell from 1.44 to 0.37 after the reports.

Nowcast Forecast: 4.0% - January 5, 2018

In contrast to the often far more volatile GDPNow Model, the New York Fed Nowcast Model rose slightly in the past week.

• The New York Fed Staff Nowcast stands at 4.0% for 2017:Q4 and 3.4% for 2018:Q1.
• News from this week's data releases increased the nowcast for 2017:Q4 by 0.1 percentage point and increased the nowcast for 2018:Q1 by 0.3 percentage point.
• Positive surprises from the ISM Manufacturing PMI and from trade data accounted for most of the increase.

Other Estimates

• Following Markit's Service PMI report yesterday, Markit Chief Economist Chris Williamson estimated 4th quarter GDP at 2-2.5%.
• Merrill Lynch: 2.3% (as noted below)

Nowcast Out of Line

The forecast by the Nowcast model seems was out of line, which is what I said about GDPNow when it soared to 4.5%.

To be specific, I said "I'll take the under, way under."

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