The Atlanta Fed GDPNow Model forecast of first-quarter GDP rose to 5.5% today on the strength of ISM and construction reports.

Latest forecast: 5.4 percent — February 1, 2018

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 5.4 percent on February 1, up from 4.2 percent on January 29. The forecast of real consumer spending growth increased from 3.1 percent to 4.0 percent after this morning's Manufacturing ISM Report On Business from the Institute for Supply Management, while the forecast of real private fixed-investment growth increased from 5.2 percent to 9.2 percent after the ISM report and this morning's construction spending release from the U.S. Census Bureau. The model's estimate of the dynamic factor for January—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data—increased from 0.42 to 1.37 after the ISM report.

I'll Take the Under (Way Under)

This is the third or fourth time that GDPNow kicked off with unusually high forecasts. Over time, those previous ridiculously- looking estimates came down. I expect the same to happen again.

For starters, ISM has been nothing but noise for at least a year. It has not matched actual factory output. Perhaps it does this time, but ISM missed the mark so often, I stopped reporting on it. Odds are the number is noise once again.

I do follow construction reports. However, construction reports are the most revised and volatile of the economic reports. I did not look at today's report yet, but my previous comments apply: Both housing and autos got a one-quarter boost from hurricanes.

Neither will jump start the economy. Interest rates are rising and payback time is in the near future. In addition, consumers overspent at Christmas and credit card debt has soared. Again, I expect reversals.

Blow-Off Top

Could this be a blow-off top? Yes. But a blow-off top in sentiment, not GDP, is far more likely, as is a housing bust.

For discussion, please see "This Isn't a Drill" Mortgage Rates Hit Highest Level Since May 2014.

Here's the problem with models: They cannot think.

Mike "Mish" Shedlock

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.

GDPNow Forecast Up Huge on Positive Economic Data

The Atlanta Fed GDPNow Model forecast for 4th-Quarter GDP jumped strongly today on economic reports since November 19.

GDPNow Morphs Into Flatline of Consistency: Take the Under

At the start of the quarter, Pat Higgins at GDPNow announced changes to reduce volatility. It worked but how accurately?

GDPNow Forecast Surges to 4.7%: Spread to Nowcast an Amazing 2.7 Percentage Pts

Following today's ISM and construction reports, the GDPNow forecast for 3rd-Quarter GDP rose to 4.7%. Nowcast is 2.0%.

GDPNow Forecast Sinks on ISM and Construction Reports

The GDPNow forecast fell to 1.7% on September 3 following weak construction and ISM reports.

Dueling Forecasts May 12: GDPNow vs Nowcast

I expected the GDPNow forecast today to take another dive today from the last estimate due to generally poor economic reports during the interim period. Instead, the model stayed flat at 3.6%. That means the model expected generally poor reports.

GDPNow Forecast Rises, Nowcast Dips on Same Economic Data

On Friday, the GDPNow and Nowcast models updated their 4th quarter GDP forecasts. One model rose, the other fell.

GDPNow "Real Final Sales" Forecast Remains 1.1%

GDPNow and Nowcast GDP estimates came out today. I believe the GDPNow estimate is closer to the right track.

Nowcast GDP Forecast Surges, GDPNow Forecast is Down a Bit

The GDPNow and Nowcast GDP forecasts for the first quarter of 2020 converged quite a bit today.