For some time now, economic data geeks have had a fun little tool to play around with — the GDPNow forecast by the Federal Reserve Bank of Atlanta of quarterly gross domestic product growth. Rather than wait three months for the official GDP data, the wonks at the Atlanta Fed broke GDP into its component parts. Tracking those as each piece was updated gave a ballpark reading of how the economy was doing in something closer to real time. The Atlanta Fed even came up with a nice marketing name for the forecasting project — “nowcasting,” which I suppose is better than the hindcasting so much of the financial and economic professional does.
Now there’s some competition. Liberty Street Economics, the blog of the Federal Reserve Bank of New York, said earlier this week that it too is getting into the nowcasting game.
The idea behind nowcasting is that we can extract information from regular data series, extrapolate in between data releases and get a real time look at GDP. Nowcasting is practically magic!
The Atlanta Fed released a white paper before GDPNow’s introduction. You can read here about the six-step approach the modelers used to construct GDPNow.
Official GDP data from the Bureau of Economic Analysis, aims to be accurate, though not very fast. It is released, updated a month later, then revised a month after that, becoming more accurate with each iteration.
The old joke seems to apply here: Do you want it fast, cheap or good? Pick two.
Continues at: A Forecast About GDP Nowcasts