Bronson Brice
Aug 28, 2017 · 2 min read

Hold your applause, and, also hold your ‘Mission Accomplished’ banners.

As more monthly source data becomes available, the GDPNow forecast for a particular quarter evolves and generally becomes more accurate. That said, the forecasting error can still be substantial just prior to the “advance” GDP estimate release.

It is not an official forecast of the Federal Reserve Bank of Atlanta, its president, the Federal Reserve System, or the FOMC.

These are excerpts from the official description of the GDPNow forecasting model, from Atlanta Fed policy adviser and economist Pat Higgins, the creator of GDPNow.

Your 3.7% estimate on August 18th was 3.8% just two days earlier, and, has actually declined to 3.4% as of August 25th. That’s a one week change of nearly 10%.

Similarly, revisions from the GDPNow (1)high estimate, (2)initial and (3) final estimates in 1st and 2nd quarters, where available, reflect the optimistic, anticipatory and volatile nature of this measurement.

1st quarter — (2) initial number, 0.7%; (3) final official number was 1.4%

GDPNow high estimate — 2.7% (1)

Differences —(2) initial, 2.0%, or 285%, and (3) final, 1.3%, or, 92%

2nd quarter —(2) initial number, 2.6%; (3) (1st of two revisions on August 30th, final on September 28th)

GDPNow high estimate — 4.3% (1)

Difference — (2) initial, 1.7%, or 65%

Given previous trends over the past two quarters, the current high estimate of 4.0% could be a 60–200% overestimation before the final 2nd quarter number arrives on September 30th. That result could be much closer to the existing Blue Chip Consensus figure, closer to 2.7%. Current estimates are at 2.6%.

It has been 2 years since growth has been near 3.7% in a quarter.

You treat this interim estimation as an accomplishment. Never mind the fact that the current environment feeding GDP has very little to do with short-term activity, within a quarter or two, or due to new, or anticipated, policy implementations.

October 1st represents the first opportunity for this administration to enact their own policies, that is, if there is no prolonged debt ceiling debate, or, an automatic continuing budget resolution in the event of an impasse. Perhaps you can save your enthusiasm for another two or more quarters.

Your ‘accomplishment’ should be better presented as a preliminary, optimistic and volatile estimate, at best.

#MAHA — Make America Hype Again

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    Bronson Brice

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