Later this week, on Thursday, 25 April 2024, the Bureau of Economic Analysis will publish its first estimate of the United States' Gross Domestic Product during the first quarter of 2024.

Because that date is so close, it's a good opportunity to check in with how 2024-Q1's GDP tracks with what a momentum-based forecasting method projected it would be for this quarter over seven months ago. That simple method, called the "Climbing Limo", uses nominal GDP data that was available back in September 2023 in its projections.

The following chart reveals how closely that method worked for anticipating the final GDP estimate for the fourth quarter of 2023 (2023-Q4), which only became available last month. As you can see, there's only a half-percent difference between the forecast for 2023-Q4's nominal GDP and the BEA's official estimate for the quarter.

If the Atlanta Fed's GDPNow forecast for 2024-Q1 is right, this quarter could be the first in which actual GDP exceeds the climbing limo's momentum-based forecast in the period covered by the chart.

Which means nearly nothing. That's because when economic growth is relatively stable, it's common for forecast and actual GDP data series to periodically cross over each other just based on variation in the data. For the period shown on the chart, which presents the Climbing Limo forecast using only the actual GDP data shown on the chart, it has been unusual for actual GDP to have so consistently underperformed the momentum-based forecast.

That could be because inflation, which is built into the nominal GDP estimates, has been slowing over this period. But there are other potential explanations that could account for that pattern as well, including slowing momentum in the U.S. economy after the initial phase of the post-Coronavirus Recession recovery.

Regardless, it will be another two months before we get the BEA's final GDP estimate for the first quarter of 2024 to see how good the Climbing Limo's forecast for 2024-Q1 turned out to be.

Looking much further forward, since the GDP data for 2023-Q4 has been finalized, the Climbing Limo method projection using that data point suggests some rather robust GDP growth through the third quarter of 2024. Unfortunately, it will be months before we find out how good that forecast is. As a general rule of thumb, it's usually within a few percentage points of the actual GDP estimate, but that can change if the economy turns a proverbial corner, either for the better or for the worse. In either of these cases, a comparison with the Climbing Limo forecast provides a useful confirmation of which situation applies.

References

U.S. Bureau of Economic Analysis. National Income and Product Accounts. Table 1.1.5. Gross Domestic Product. [Online Database]. Accessed 21 April 2024.

Political Calculations. Forecasting GDP Using the Climbing Limo. [Online Tool]. 10 May 2005.

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