Economic Boom Thesis Nothing More Than a Hurricane-Related Mirage

On Friday, both GDPNow and Nowcast updated their models. The former estimates 1st-qtr GDP at 3.2%, the latter at 3.1%.

It's been a wild ride for the GDPNow Model, not so for Nowcast.

GDPNow Forecast: 3.2 Percent - February 16, 2018

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 3.2 percent on February 16, unchanged from February 14. The nowcast of first-quarter real residential investment growth fell from -0.6 percent to -1.7 percent on February 15 after the industrial production release from the Federal Reserve Board of Governors and the Producer Price Index release from the U.S. Bureau of Labor Statistics. The nowcast increased to 0.6 percent after this morning's new residential construction release from the U.S. Census Bureau.

Nowcast Forecast: 3.1 Percent - February 16, 2018

  • The New York Fed Staff Nowcast for 2018:Q1 stands at 3.1%.
  • News from this week's data releases decreased the nowcast by 0.2 percentage point.
  • Positive surprises from housing starts and building permits only partly offset negative surprises from retail sales, industrial production, and capacity utilization.

GDPNow Evolution

Let's switch to a portion of GDPNow's downloadable spreadsheet for further details.

Change in Private Inventories

Unlike Nowcast, GDPNow estimates the Change in Private Inventories (CIPI).

Overall, GDP is at 3.2%, down from 5.4% on February 1. GDPNow's real final sales estimate stands at 2.0%, down from 4.1% on February 1.

Final sales is the true bottom line measure, because additions and subtractions to inventory net out over time.

If we get another bad retail sales report, as I suspect, that 2% estimate will shrink even further.

Boom Was a Mirage

The hype we have seen about the strengthening economy now appears to be nothing but a hurricane-related mirage, something that I suggested would happen months ago.

For a look at why the GDPNow model went haywire, please see Pat Higgins Explains the Wild 5.4% GDPNow Forecast Made February 1.

The problem with models is that they do not think.

Mike "Mish" Shedlock

Comments (16)
No. 1-16
8dots
8dots

Count MIshkin, google :

8dots
8dots

Mathiew Carey 1760 -1839, or :Erathmus Pershine (!) Smith.

lol
lol

driven again by soaring gov't (borrowing)spending.soaring stagflation,soaring gov't dependency,trump will be first president in history to have (officially)multi trillion annual deficits,2 trillion next year and wait for it....3 TRILLION IN 2020 ,king of dept is right

8dots
8dots

Correction: Henry Carey 1793-1879 and Friedrich List 1789-1846 and Erathmus Pershine Smith, the national system. Michael Hudson can give y more info than google. Trump will filter debt.

truthseeker
truthseeker
http://investmentresearchdynamics.com/is-the-fed-back-to-quantitative-easing/

Mish after your comments the other day on “plunge in interbank lending: the straw that broke the Fed’s back.” I think we all thought it didn’t take long for the credit markets to show us that the drain of liquidity from the 4 trillion of QE can’t take place without crashing equity and commodity prices. Here is a link to a guy I found over on goldseek with some comments I hope you haven’t seen yet I thought you and your followers might find of interest.