New York Fed 2nd Quarter “Nowcast” Rises to 2.2% Following Housing, Durable Goods Reports

The New York Fed Nowcast Model for second quarter GDP rose to 2.2% from 1.7% in today’s release.

The increase was largely due to a massive jump in new home sales. Durable goods also added to the strength.

Nowcast Highlights May 27, 2016:

• The FRBNY Staff Nowcast for GDP growth in 2016:Q2 has increased for the third week in a row and stands now at 2.2%.
• Positive news came from new single family houses sold and manufacturers’ new orders of durable goods.
• This week’s second estimate of GDP growth for 2016:Q1 from the Commerce Department was 0.8%. In the advance estimate released last month, GDP growth was 0.5%. The last FRBNY Staff Nowcast for that quarter, computed before the release of the advance estimate, was 0.7%

Second Quarter Nowcast

(Click on image to enlarge)

Second Quarter Nowcast Detail

(Click on image to enlarge)

Housing, durable goods, and revisions added 0.254, 0.099, and 0.074 percentage points to the model forecast.

GDPNow, Nowcast, Markit Estimates

In response to the amazing jump in housing starts, Nowcast rose 0.254 percentage points as noted above. GDPNow added nothing but did grow for other reasons (see link #3).

This adds to the model discrepancy confusion I noted in on May 20 (see link #4).

On May 25 (link #2) Markit chief economist Chris Williamson had this to say:

“A deterioration in the survey data for May deal a blow to hopes that the US economy will rebound in the second quarter after the dismal start to the year. Service sector growth has slowed in May to one of the weakest rates seen since 2009, and manufacturing is already in its steepest downturn since the recession. Having correctly forewarned of the near-stalling of the economy in the first quarter, the surveys are now pointing to just 0.7% annualised GDP growth in the second quarter, notwithstanding any sudden change in June.”

Today I spoke with a leading economist at the New York Fed about their model. I have already spoken with the Atlanta Fed.

I will have a write-up next week on the models.