Howestreet.com - the source for market opinions

ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

February 22, 2019 | Cusp of Recession: GDPNow 1.4% vs Nowcast 2.1%, Nowcast 2019 Q1 is Only 1.2%

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
After trailing GDPNow for nearly the entire quarter, Nowcast now Lead GDPNow by one full percentage point.

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

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

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the HoweStreet.com Weekly Recap.

February 22nd, 2019

Posted In: Mish Talk

Post a Comment:

Your email address will not be published.

All Comments are moderated before appearing on the site

*
*

This site uses Akismet to reduce spam. Learn how your comment data is processed.