Apr 26, 2019

The difficulty with predicting GDP

Dion Rabouin, author of Markets
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Data: Atlanta Fed and New York Fed; Chart: Axios Visuals

Even the world's top economists, using nothing but economic data releases, couldn't come close to an agreement on what Friday's U.S. GDP print would be.

Background: The New York and Atlanta Fed both have GDP forecast tools that plug various readings into a framework in order to provide a rolling estimate of what quarterly GDP is expected to be. Both central bank regional branches insist the forecasts don't reflect opinion or input from the economists, "just the data."

Two major differences between the forecasts:

  • The New York Fed's model factors in the previous quarter's data while Atlanta's does not.
  • The Atlanta Fed's model uses only certain economic data while the New York Fed's factors in every economic release on a sliding scale of importance.

The ultimate result? Atlanta ended up on the right trend. The economy grew at a 3.2% annualized rate in the first quarter of the year — a faster pace than the previous quarter's 2.2% and significantly more than the 2.1% economists were expecting, writes Axios' Courtenay Brown.

Go deeper ... Goldman Sachs: First quarter of 2019 is a "GDP pothole"

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