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.
Following the second consecutive ISM spike I had the following Email exchange with Pat Higgins.
Mish ISM Question
Hi Pat,
How much of today’s jump was due to ISM and how much construction?
Thanks,
Mish
Higgins
Hi Mike,
If you replace today’s values of GDPNow’s dynamic factor with the values as of February 27, the growth forecasts for consumer spending (2.0%), residential investment (-5.9%), and nonresidential structures investment (-0.8%) were all below their February 27 readings. The counterfactual forecasts are in parentheses. The rise in the factor values due to incorporating today’s ISM Manufacturing release, and other previously released data for February, played a large role in the increase in the nowcast. The data in this morning’s personal income and outlays release was incorporated in today’s update.
If you look at row 4 of the tabs Consumption, Equipment, IntellPropProd, NonresStructures, Residential, ExportsImportsGoods, ExportsImportsServices, FederalGovt and StateLocal you’ll see the factors in row 4. If you change the factor values, you’ll see the forecasts change for each of the subcomponent forecasts. The factors are also in the tab Factor all the way to the left. The other tabs read in the values from this tab, so you can change them here and they will change in the other tabs as well.
Best regards,
Pat
I replaced the factors with the ones from February 27 but the bottom line calculation did not change. Higgins explained.
Hi Mike – the spreadsheet is not going to make that calculation. That cell is hard-coded – it’s the published forecast on March 1 as is and it is not going to change as you change the factors. The only thing that will change are the subcomponent forecasts in the tabs Consumption, Equipment, etc. To derive the GDP forecast would take a little work. I was referring you to the tab Consumption. Thanks for forwarding me the link – I’ll take a look at it.
Pat
