The GDPNow Model forecast for 1st quarter 2017 GDP plunged 0.5 percentage points to 1.3% following recent economic data.
Today’s dismal trade data was not a factor. Advance trade data on February 28 showed the trade deficit in goods jumped 7.6% to $69.2 billion, and that data was already factored into the model.
The reason for today’s plunge was light vehicle sales on March 2 and the factory orders data yesterday.
Latest forecast: 1.3 percent — March 7, 2017
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 1.3 percent on March 7, down from 1.8 percent on March 1. The forecasts for first-quarter real personal consumption expenditures growth and real nonresidential equipment investment growth fell from 2.1 percent and 9.1 percent, respectively, to 1.8 percent and 7.3 percent, respectively, after Thursday’s motor vehicles sales release from the U.S. Bureau of Economic Analysis. The forecast of the contribution of inventory investment to first-quarter growth fell from -0.50 percentage points to -0.72 percentage points after yesterday’s manufacturing report from the U.S. Census Bureau.
GDP Release Dates
- The auto sales report took off 0.3 percentage points from the March 1 estimate.
- The factory orders and shipments report took off another 0.2 percentage points.
- ISM services did not affect the model, nor did today’s trade report.
Meanwhile, and in a switch in roles from a month or so ago, it is the New York Fed Nowcast Model that seems wildly high.
- New York Fed Nowcast (March 3): 3.1%
- GDPNow (March 7): 1.3%
- Markit (March 3): 2.5%
The Markit forecast was made by Chris Williamson, Markit Chief Economist. For details, please see PMI Services Lowest Reading in 5 Months; ISM Services Highest Reading Since October 2015.
Flashback February 2
Take the Under
I do not buy this enormous jump in predicted GDP for one second.
For 4th quarter of 2016, the final Nowcast was at 2.1%,. GDPNow was at 2.9% off a full percentage point.
When looking at this latest GDPNow forecast of 3.4%, I will place my typical mental bet when looking at these hugely optimistic forecasts: “Take the under, way under”.
- February 28: Trade Deficit Unexpectedly Widens: Exports Sink, Imports Up Sharply
- February 28: March Rate Hike Odds Surge to 80 Percent: New Standard for “Surprisingly Strong” Economy
- March 1: GDPNow Forecast Plunges to 1.8% Following Personal Income and Outlays Report.
- March 6: Factory Order Details Disappoint Again
- March 7: Trade Deficit Steepens Led by China: Top Six Offenders
If the latest GDPNow estimate is close to the mark, it will be amusing watching the Fed hike in what they label a “surprisingly strong economy”.
Mike “Mish” Shedlock.