NGDP Outlook

NGDP Outlook-May 21, 2017

The NGDP outlook has rebounded a bit from a low point for the current Quarter-2 of 2018 forecast that was seen in early May. Notably, the rebound preceded the recent volatility in US Equities. Recapping the recent moves in US equities: the S&P 500 tanked on May 17, falling about 1.7 percentage points. The drop seemed linked to perceptions of an impending “coup” against the Trump administration, raising expectations that the tax cut already priced into shares would be less likely to happen. However, once again it appears to be a case of media-made smoke, and shares rebounded on the…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

NGDP Update May 2017

The NGDP outlook has held mostly steady over the past month, with the year-over-year figure for Q2 of 2018 fluctuation from a maximum of 3.9% to a minimum of 3.75%. This narrow range of variation came despite the introduction of the first estimate of NGDP for Q1 of 2017 on April 28th , which lowered the year-ahead forecast by less than a tenth of a percentage point. The NGDP outlook for Q1 of 2018 that is, the datum we forecast last quarter, is similarly holding up rather well. This figure is currently tracking just under 4%, in line with the…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

A new quarter, a new forecast

We’re now in the second quarter of 2017, so, in keeping with our convention to focus on the year-ahead part of the NGDP outlook, we are switching from the 2018Q1 forecast to the 2018Q2 forecast. The forecast for 2018Q2 is notably lower than that for 2018Q1, falling from nearly 4.1% year-over-year to just over 3.8%   This shouldn’t be taken to mean that the outlook has changed, we simply haven’t been making a point to show you the 2018Q2 forecast until now. Our forecast procedure works by forecasting nominal GDP amounts for the six quarters following the latest available GDP…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Yellen Preserves the Sanctity of the Punch Bowl

The market reaction following Chairwomen Yellen’s announcement of Fed policy on March 15th was clear, it wasn’t as bad as feared. Our NGDP forecast engine (which is based on daily average data, not closing prices) ticked up from 4.06% to 4.11%. The two decimal points of precision should not be read as an overestimation of our forecasting abilities, but serves instead to show that markets indeed moved up. Yellen’s statement was ambiguous, noncommittal, more in the mold of the great Alan Greenspan than Ben Bernanke. The tiny but welcome forecast increase between the 15th and the 16th was driven by…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

All quiet on the nominal front

Little has happened to the NGDP outlook in the past week. It still looks like we’re set for about 4% nominal growth from the current quarter through to 2018Q1. This is probably about as good as we can expect in the current environment, so let’s be grateful for it. 4% nominal growth isn’t ideal, it doesn’t give employers much opportunity to cut real wages through inflation, and doesn’t do anyone who took out debt pre-2008 any favors. Yet 4% is enough to keep the economy expanding and to stave off recession.  Barring a major change in the direction of financial…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

A Modest upturn in the outlook

The outlook has improved since February 2016. According to our NGDP forecasting system, which is statistically driven, so immune to partisan bias or wishful thinking, a full percentage point of nominal GDP has been added to the outlook.  We have gone from the low 3%s to the low 4%s in terms of expected year-ahead growth. Our normal plot for showing these data reports only the latest year-ahead forecast. However, to get this forecast, we forecast quarterly GDP behind the scenes, and then do the needed calculations to update the plot. This is a convenient way of showing how the outlook…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Moving on up in Q1

We’ve updated our market-driven nominal GDP forecast through January 25th, which is about as far in time as we can do it without violating anyone’s intellectual property rights. Can you believe Bloomberg want’s $3k a month for a data feed? This post is being written on January 28th, a day after the first estimate of Q4 2016 has been released. However, because we won’t have access to Friday’s market data, at least from a source we can republish from without legal risk, we’ve opted to leave this new NGDP observation out of our forecasting system. Thus the first day that…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

With the end of the fourth quarter, we have abandoned the old year-ahead forecast and now focus on updating the new forecast, for one year ahead of the current quarter. As always when transitioning to a new quarter, we remind readers that the jump or drop in the transition, in this case moving from 3.7% to nearly 3.9% is not meaningful. We produce actual NGDP level forecasts for the next year and a half of as-yet unpublished NGDP levels, and simply report the year-ahead growth figure from that forecast sequence, from the current quarter. So last quarter, we reported: 2017Q4/2016Q4-1…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

Merry NGDP Revisions

GDP revisions came out last week and the last 4 forecast points reflect the new figures. However, in this case, the revision has essentially zero effect on the forecast. This is because GDI,  an alternative, but equally valid measure of GDP, was revised in the opposite direction, leading to negligible change in the series we use to drive our forecast. GDP in Q3 went from 18,657 million to 18,675 million while GDI went from 18,985 to 18,969. Because we average GDP and GDI when making the final income/spending series we use in the forecasting engine, this works out to 18,822 vs…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share

The FOMC’s latest policy announcement had undone much of post-Trump bounce in NGDP expectations. The quarter-point rise in the Fed Funds target window was all but fully priced in to markets, so the sour tone of markets following the announcement must be due to other hints in Yellen’s statement. Presumably markets were less than enthusiastic about the prospect of three rate increases in 2017. In the coming week, we will get a third revision to NGDP and NGDI, which could move the forecast a bit. We’ll also see how the market rebound on Friday affected things (currently our data sources…...

This content is for Free Trial and Subscriber members only.
Log In Register
Share