Wide Discrepancy
- In the past week, the GDPNow model forecast rose to 2.0% from 1.5%.
- In the past week, the Nowcast model forecast fell to 0.6% from 0.8%.
Not only were the starting points very different, the models responded in opposite fashion to the same economic news.
GDPNow rose 0.5 percentage points while the Nowcast fell 0.2 Percentage points, a net difference of 0.7 percentage points.
How?
The models do not react to the news itself, but rather to what happened vs what the model expected to happen.
The economic news was disappointing to Nowcast expectations, but hugely positive to the GDPNow expectation.
Blue Chip Forecast Via GDPNow
The range of the Blue Chip professional forecasts is 1.0% to +2.0%.
GDNow is at the very top end of Blue Chip whereas Nowcast, at 0.6% is 0.4 percentage points lower than the lowest Blue Chip estimate (but that Blue Chip estimate is a bit stale).
Jobs Data
For a discussion of today’s jobs data please see:
- Jobs Surge in Strike-Ending and Seasonal Adjustment Rebound
- Trump Tweets “Manufacturing Blowout”: What’s the Real Story?
Mike “Mish” Shedlock
One model might be slightly less bad than the other, but both models are garbage.
Academics, in university and staffing the Fed’s “research” divisions, are people who can’t hack working in the real world.
Academic models are useful tools to help understand what already happened, but in that role the models are incomplete.
Used for forecasting, the models are garbage. TV personalities use them to fill air time.
Not always, and it is far more volatile
The consumer is still hanging in there. Courtesy of ever increasing load of debt, of course.
Yesterdays consumer credit report (October)
Consensus … +$15.8 billion
range of “experts” … +$11.6 billion to +$17.6 billion
Actual … +$18.9 billion.
The economy will continue its low quality growth (debt based) until the delinquency / default monster storms into the room. The first rumblings are present. I fully expect it to escalate quickly in the near / mid term.
“The models do not react to the news itself, but rather to what happened vs what the model expected to happen.”
…
Yes. And Q4 can be boosted by downward revision to Q3 numbers.
Take yesterday’s Monthly Wholesale report (October) on Sales/Inventories … report showed a +0.1% gain in inventories. Bullz relish as “sign” business has confidence in economy so adding inventory.
Well, looking under the hood –
Inventories previous report … September $676.710 billion
This report … September $674.897 billion … October $675.573 billion.
If not for downward revision to September, headline for Inventories would have been negative … September sales revised downward, as well. Inventories / Sales creeping ever higher … October 2018 1.30 … October 2019 1.37 … which is very close to cycle high of 1.38 last seen in near recession of early 2016. Any higher and we’re talking 2009.
How can anyone possibly take any economic numbers seriously coming out of this administration? (and its side business, the Fed). GDP, inflation and unemployment numbers are so squishy and massaged as to be useless. The stock market was a real, market-based number for awhile, but now even that is compromised.
“Administration” has nothing to do with it. Aside from the most straight forward and simplistic ones, like Gold above ground and its rate of change, Economically relevant variables”, are fundamentally resistant to being measured to any meaningful extent. There simply is no “inflation” thingy laying around one can stick a probe into. Nor GDP. Nor “unemployment.” Nor any of the rest of the drivel less-than-bright quacks like to pretend have real meaning.
The entire “empirical economics” project, is nothing but pseudoscience, quackery and attempted excuses for why whomever’s got the guns, or whomever has those guys’ ear, should be granted leeway to arbitrarily interfere in the lives of others. Never for any other reason than crass personal gain.
Interesting. I didn’t know much about nowcasting so I read up on it here.
link to newyorkfed.org
I wonder when this was released? Is the market ignoring it?