The GDPNow model forecast for 1st-quarter GDP is -0.3% as of April 16. The NY Fed Nowcast is -0.4%.

GDPNow vs Nowcast Evolution

GDPNow and Nowcast 2020-04-17

Super Optimistic

Compared to the Blue Chip forecast these models look ridiculously optimistic. 

RECOMMENDED ARTICLES

The GDPNow website offered this tidbit.

There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. 

In particular, it does not capture the impact of COVID-19 beyond its impact on GDP source data and relevant economic reports that have already been released. It does not anticipate the impact of COVID-19 on forthcoming economic reports beyond the standard internal dynamics of the model.

Stranger things have happened but I pinged Pat Higgins specifically about unemployment claims as I thought that may be the source of the error. 

Here is the response from Higgins who is always generous with his time.

Hi Mish,

The model does use initial unemployment insurance claims among the 126 series used to estimate the monthly factor used to forecast yet-to-be released data.

However, the spike in March claims is identified by the code as an outlier and replaced with a more typical value.

Our policy is to not change the code in the middle of a quarter, so we can’t change how the code handles outliers until we begin forecasting the second quarter.

Whether or not March claims is treated by the code as an outlier does not have an outsize impact on the first quarter forecast, in part because it is only 1 of 126 series and because much of the first-quarter data has been released.

I can’t really say how a spike in unemployment would effect the forecast because of the FOMC blackout which ends a week from Friday. I can follow up after that however.

Best regards, 

Pat

Mish

GDPNow-ISM Dynamics: Email Discussion With Pat Higgins

On Feb 1, the GDPNow forecast surged to 5.4% on ISM. It did so again last week. I discussed the setup with Pat Higgins.

GDPNow Drops to 3.8%: My Email Exchange With Pat Higgins on Volatility

Following today's income and outlays report, the GDPNow forecast took a dive to 3.8% from 4.5%. Nowcast barely moved.

"Dynamic Factor" Boosts GDPNow Following ISM: Email Discussion With Pat Higgins

On July 2, the GDPNow model for 2nd-quarter GDP jumped to 4.1% from 3.8%. An email exchange with Pat Higgins explains.

Email Exchange With GDPNow Creator Pat Higgins on GDP Inventory Adjustments

GDPNow forecasts an inventory adjustment of -1.09 percentage points this quarter. What's going on?

Email From Pat Higgins On the Dynamic Factor Volatility of GDPNow

Following the ISM manufacturing report, the GDPNow model upped its 4th quarter GDP forecast from 2.9% to 4.5%. On Friday, GDPNow revised its forecast to 3.3%. An Email from Pat Higgins, creator of GDPNow explains what happened.

Inventories a GDP Wildcard: Email Exchange With Pat Higgins

About 1 million cars were damaged by recent hurricanes. Inventory was wiped out at some dealerships. Inventory replenishment is up, and not just for autos. This poses a problem in forecasting third-quarter GDP. Did the change in private inventories (CIPI) rise or fall?

Pat Higgins Explains the Wild 5.4% GDPNow Forecast Made February 1

The GDPNow model forecast jumped to 5.4% on February 1, only to come crashing down the next day.

Huge Difference Between GDPNow and Nowcast Models

The Atlanta Fed GDPNow and the New York Fed Nowcast GDP models once again are wildly different.