Nowcast GDP Forecast Surges, GDPNow Forecast Is Down A Bit

The GDPNow and Nowcast GDP forecasts for the first quarter of 2020 converged quite a bit Friday.

Step Towards Convergence

Whereas the GDPNow forecast fell from 2.3% to 2.1%, the Nowcast forecast jumped from 0.7% to 1.3%.

• The gaps between the two competing forecasts was 1.6 percentage points a week ago.
• Today the gap is 0.8 percentage points.

Conversation on the Models

Neither GDPNow nor Nowcast incorporate such factors into their models. They have a model that makes a guess. If reports perform better than their model predicted the estimates rise. Leads to some strike and weather-related peculiarities. https://t.co/r02TgLzTVR

— Mike "Mish" Shedlock (@MishGEA) December 20, 2019

Industrial Production

Convergence is somewhat due to Nowcast delays in factoring in industrial production impacts in the wake of the GM Strike that Ended on

I commented on the bump on December 17: Industrial Production Rebounds after GM Strike Ends.

Looking ahead, Boeing is going to have a significant impact in the first quarter.

Thousands of jobs and possibly as much as 1/3 of a point of GDP as Boeing Will Suspend 737 Max Production in January.

Inventory Analysis

The most interesting aspect of the report is GDPNow sees a first quarter drawdown in inventory but Twitter comments seem to expect an inventory build.

Inventory calculations are a crapshoot even in normal circumstances. They are even more difficult now.