In the story summary above, I initially wrote “GDPNow has had a hot hand, but I do not think we get close to 4.5% growth”.
I noticed GDPNow had an update due today and it appeared when I hit refresh.
What Happened
The biggest hit was in Personal Consumption Expenditures (PCE). Today’s wage growth was anemic and actual employment fell. I will confirm with Pat Higgins, creator of GDPNow, but I suspect wage growth is the culprit.
Today’s factory report (new orders up 1.4% vs a consensus 1.2% gain) seemed reasonable, but it had to underperform the model expection as well.
As is typically the case, the FRBNY Nowcast shows much less volatility to data changes.
FRBNY Nowcast
Model Comparison
Following the November 1, Nowcast estimated the net impact of ISM and construction at -0.17 percentage points. GDPNow estimated the combined impact at +0.60 percentage points.
That’s a wild net difference of 0.77 percentage points in terms of how the models reacted to the November 1 data releases.
Today, Nowcast estimates the net impact of the employment report as +0.07 percentage points. GDPNow knocked a full percentage point off it’s forecast today, but I am unsure of the exact contribution from employment.
I will update this post when I have more precise numbers.
Mike “Mish” Shedlock
