In the wake of dismal retail sales, first-quarter GDP forecasts by the Atlanta Fed GDPNow model and the FRBNY Nowcast model ticked lower. Let’s investigate the details and compare the current estimates.
Nowcast Latest Forecast: 2.6 Percent — April 14, 2017
GDPNow Latest Forecast: 0.5 Percent — April 14, 2017
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 0.5 percent on April 14, down from 0.6 percent on April 7. The forecast for first-quarter real consumer spending growth fell from 0.6 percent to 0.3 percent after this morning’s retail sales report from the U.S. Census Bureau and the Consumer Price Index release from the U.S. Bureau of Labor Statistics.
Easy Forecast
The impact of this week’s economic forecasts was easy to predict.
On April 12, in Import Prices Decline, Export Prices Rise: Impact on 1st Quarter GDP Estimates? I had this to say: “Effectively, import prices were flat as export prices rose 0.2% for the month. This will add a tick or so to GDP estimates for the first quarter but it will likely be at the expense of negative pressures for the second quarter.”
The GDP Now model did tick up 0.1 percentage points on the import/export data, then declined 0.2 percentage points today on retail trade data.
The GDP downgrade would have been worse had it not been for the CPI running well under consensus at -0.3% for the month.
A week ago, in Six GDP Estimates: ZeroHedge, Mish, GDPNow, Nowcast, ISM, Markit I noted my April 3 prediction of 0.6% while commenting:
The jobs report did not change my estimate.
Next Friday, we have a trifecta of CPI, Retail Sales, and Business Inventories. Those reports can easily combine to move my forecast down to zero or back above one percent.
My guess now is that something on the order of 0.5% is baked in the cake.
