NGDP Forecast Update: First Q3 Print

During the first month of every quarter we are flying, even if not quite blind, not as well informed as we might like.  This is because we don’t get official statistics on the previous quarter’s GDP until a month in. As a result, we have to use an estimated GDP number, which means we usually have a bit of a ‘correction’ when the first estimate comes in. For 2017Q3, the first GDP estimate was released on Friday, October 27.

The new GDP number has US final nominal spending at a yearly pace of 19.495 trillion USD, which is up an encouraging 5.2% annualized from the previous quarter. From a statistical standpoint, the only thing that has changed in our NGDP dataset is this quarterly growth rate.

When we ran the forecast system with the new number for the first time, the year-ahead outlook hardly moved, holding around 4.07%. This happened because we had been estimating the Q3 number close to what turned out. Usually we are ‘surprised’, at least somewhat by the first GDP estimate, or to put a positive light on it, we ‘gain information’.

Therefore, the outlook is holding up, just north of 4% nominal growth. Those of us with an optimistic bias hope that the heir apparent at the Fed, Jerome Powell, can build on Yellen’s legacy of modest improvement from the Bernanke disaster and prove this forecast wrong. But right now, the markets appear to say “4%”.


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