The Atlanta Fed updated its GDPNow Model yesterday. The New York Fed updated its Nowcast model today.

For the first time in a long time, the Nowcast model is a full percentage point higher than GDPNow on the base forecast.

Real Final Sales

Nowcast does not provide a “real final sales” forecast. That is the bottom line estimate of the GDP forecast.

GDPNow assumes that inventories, which net to zero over time, will add 0.6 percentage point to GDP.

That is a bad sign, if accurate, and retail sales do not pick up. The Nowcast seems to be factoring that in.

Let’s look ahead.

Nowcast 2019 Q1 Forecast

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History

GDPNow has had a hot hand, but factoring in GDPNow’s estimate of inventories, the models are converging lower, way lower, and suddenly lower.

I suspect both are on the high side at the moment. If housing and autos don’t pick up, we are on the cusp of recession, if indeed not in one.

If retail sales sink further, recession will be confirmed.

Mike “Mish” Shedlock