Courtesy of Mish.
“Blue Chip” Optimism
The Atlanta Fed initial GDPNow Forecast for first quarter 2016 starts off with an anemic 1.2% whimper.
“The initial GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 1.2 percent on February 1. “
First Quarter 2016 GDPNow Forecast
The Atlanta Fed “Final” GDPNow Estimate for the 4th Quarter was posted on January 28.
The 4th quarter “Blue Chip” consensus at that time was about 1.9%. The actual BEA release was 0.7%.
Strengths and Weaknesses of GDPNow
The strength of the Atlanta Fed GDPNow model is that it mimics BEA calculations, thus providing an advance look as to what the BEA will report.
The inherent and unavoidable weakness in the GDPNow model is BEA revisions. GDPNow mimics a model in which data is revised, revised, and revised again.
Late last year the BEA announced it made a major “processing error” in regards to construction spending. The error affects GDP all the way back to 2005.
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