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Formulas Don’t Think: Investigating Weather-Related GDP

By Ilene
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Courtesy of Mish.

The New York Fed updated its GDP Nowcast forecast for 4th quarter 2016 and 1st quarter 2017 last Friday.

Normally I report on such events, on the day of the release, but I failed to do so with all the brouhaha associated with Trump’s inauguration.

Looking now, an item in the Nowcast caught my eye, leading to the title of this article. What caught my eye is weather-related.

January 20, 2017: Nowcast Highlights

  • The FRBNY Staff Nowcast stands at 2.1% for 2016:Q4 and at 2.7% for 2017:Q1.
  • This week’s news had positive impact, moving the 2016:Q4 nowcast up by 0.2 percentage point and the 2017:Q1 nowcast up by 0.6 percentage point.
  • The largest positive surprise came from industrial production and capacity utilization data.

Detail shows the 4th quarter 2016 Nowcast rose from 1.94 to 2.08. Industrial production added 0.077 percentage points to the estimate. Capacity utilization added another 0.074 percentage points. Together they accounted for 0.151 percentage points of the total rise of 0.14 percentage points (more than all of it). I have no problems with that calculation.

Nowcast 2017 1st Quarter

nowcast-2017-01-20

OK, so what’s wrong with that?

The title of an article I wrote on January 18 explains: Industrial Production Jumps Due to Weather: Good News Stops There.


Continue reading here…

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