The Atlanta Fed produces occasional estimates for GDP, using the most up to date government data sources. They call this forecast “GDPNow“, and the New York Fed produces a similar forecast. Before proceeding further, let me emphasize that this post is not bashing these two Fed banks, indeed the latest Atlanta Fed forecast comes with this disclaimer:

GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 beyond its impact on GDP source data and relevant economic reports that have already been released. It does not anticipate the impact of COVID-19 on forthcoming economic reports beyond the standard internal dynamics of the model.

The Atlanta Fed issued an updated forecast today, showing 2.7% RGDP growth in Q1.  The New York Fed forecast 1.7% RGDP growth in Q1 and 0.3% in Q2.  Now you see why they put in the disclaimer.

It’s clear that these models are not actually giving us “GDPNow” in the sense of the optimal forecast given today’s information.  They are giving us the optimal forecast given publicly available macro data released by the government.  But the rational expectations model says that optimal forecasts are based on all publicly available information.

As of today, Hypermind forecasts 0.1% NGDP growth in Q1 and minus 3.6% in Q2.  Presumably their implicit RGDP forecasts are even a bit lower, at least for Q1.  Even so, I don’t believe Hypermind is deep and liquid enough to provide an optimal forecast, and for weeks I’ve viewed that market as being somewhat behind the curve in recognizing the severity of the oncoming slump.

Nonetheless, it would be nice for at least one of the Fed banks to produce a true NGDPNow and RGDPNow forecast, given all publicly available information.  That’s not easy, but I imagine that if you look back throughout history you’ll find that periods with multiple back to back stock market crashes in the 6% to 12% range, a sudden collapse on T-bond yields, plunging oil prices, and (especially) enormous weakness in assets like junk bonds, are usually associated with a sudden and sharp drop in the broader economy.

[Someone correct me if I’m wrong–Perhaps 1987 was an exception, but how did other markets besides stocks do in 1987?]

So how about it?  Which Fed will step up to the plate and produce a truly cutting edge forecast?  The St Louis Fed used to be monetarist—how about trying market monetarism?

PS.  I do understand that this crisis is unique, and no mathematical model would be expected to perform all that well.  (Imagine trying to forecast yesterday’s weekly jobless claims).  But I still believe that more reliance on market indicators would improve GDPNow.

PPS.  David Levey sent me this video of a guy imitating Trump.  Even if you like Trump, you got to admit he’s a talent mimic.

PPPS.  A couple of years ago, I said I would not blame Trump for any recession, and I’m sticking with that.  I’m not even blaming him for more than small portion of the surge in cases in the US, despite him being behind the curve on preparedness.  I’m sticking with the “Presidents only explain 3% of outcomes” worldview.  I try to avoid motivated reasoning, much as I’d enjoy blaming Trump for everything.

PPPPS.  I see Boris is doing his part to build up the UK’s “herd immunity”.  I don’t like his politics but I wish him well.



33 Responses to “GDPBefore”

  1. Gravatar of John Hall John Hall
    27. March 2020 at 10:27

    Note that Atlanta’s GDPNow and the New York Fed’s Nowcast don’t really even use all available government information. We know that because none of them even using weekly initial unemployment claims, otherwise there would have been a big decline in the forecasts today (and you can check the research papers that go into the details and they aren’t there).

    That being said, the research on nowcasting does not prevent doing what you are talking about with respect to your point about what the markets are doing. They are general enough that you can throw in mixed frequency data and have a shock from equity and junk bond markets being transmitted to the economic data. Probably a bit time-consuming with daily data, but weekly should be do-able.

    On your PS, there were some people who gave pretty good estimates of the jump in jobless claims. They didn’t use time series econometrics to do it though. They looked at things like how many workers were in industries that would get hit and just ballparked that X% would get laid off. It’s a mathemtical model in some sense, but not a regression model….

  2. Gravatar of ssumner ssumner
    27. March 2020 at 11:39

    John, Good points.

  3. Gravatar of Ray Lopez Ray Lopez
    27. March 2020 at 11:49

    Sumner bemoans the lack of data in a predictions market, as IMO a crutch in case his monetarism, now de facto adopted by the Fed, fails. Sumner will claim the Fed should have done more, or that their economic data was lacking. But there’s already a GDP forecasting tool: it’s called the US stock market. And, just like any activity involving humans, it has “up-and-downs” just like a prediction market itself. The stock market has ‘gotten right’ (predicted right) 9 out of the last 5 recessions, and, btw, it got just a month ago this recession completely wrong, even though it was obvious from a mile away.

    PS–And what does Sumner think of money neutrality? Amazingly, he pretty much agrees with me. See below. Welcome to the dark side Scott. -RL – Sumner: Well, to change the topic slightly, I would also go back to the notion that–my view, which is a little bit different from many others, is that interest rates mostly reflect market forces over any sort of reasonable period of time. So, on a day-to-day basis, the Fed may be setting interest rates. But over any longer period of time they basically have to be reflecting market forces. If they weren’t, you’d get an explosion of hyper-inflation or -deflation. The economy would become highly unstable. And since we’re not seeing that, we have to assume that the place where the Fed seems to be setting interest rates must be relatively close to an equilibrium interest rate. Otherwise we would be seeing some signs of strong disequilibrium in the market. Which we’re just not seeing, in the macroeconomy. So, something is causing it that is, in my view not what would be considered artificial. And a lot of the people I debate on this say, well, interest rates are just being held artificially at this level and this isn’t the correct level. But this is the level where the market has them. And no one’s been able to convince me that the Fed is a magician that can make interest rates be vastly different from their equilibrium level and hold them there for many, many years without any sort of inflation or deflation side-effects cropping up.

  4. Gravatar of Gene Frenkle Gene Frenkle
    27. March 2020 at 11:57

    I agree Trump should not be blamed for this recession, but W Bush deserves a lot of blame for the Financial Meltdown/Great Recession. Bush Energy Department officials have stated that they would have meetings in the War Room and discuss the energy crisis we were in from 2001-2008…and yet to this day many people do not know we suffered an energy crisis during that period. So in 2004 it was obvious to me the economy was dysfunctional but Bush made the Housing Bubble a major argument for re-election. So he promoted a bubble during a dysfunctional economy while downplaying the energy crisis causing the dysfunction. Furthermore the mismanagement of the Iraq War exacerbated the dysfunctional global oil market by causing uncertainty—a stable Iraq would have flooded the oil market with cheap oil so Big Oil didn’t invest in production.

  5. Gravatar of agrippa postumus agrippa postumus
    27. March 2020 at 12:31

    the fed will immiserate the people until it switches to ample liquidity at a penalty rate. let the capital providers, those with real capital and not fed induced leverage at zero rates, set the rates for any and all businesses, and let the fed thru blackrock and other asset managers dutch auction off the purchase of the credit provided by the fed to the capital provider at premium or discount. they’ve got it all backwards.

  6. Gravatar of ssumner ssumner
    27. March 2020 at 13:01

    Ray, Are you stupid, or just dishonest?

    Gene, I disagree about Bush. If he’s to blame for 2008, then Trump’s to blame for this one. (Actually, neither are to blame.)

  7. Gravatar of Gene Frenkle Gene Frenkle
    27. March 2020 at 13:32

    Sumner, but we disagree about the underlying cause of the Housing Bubble/Financial Meltdown. I remember 2004 and Ohio did not have a strong economy in 2004. The states that had strong economies were states with housing booms, and the housing boom took two swing states out of contention in 2004–NV and FL. So it was very self serving for Bush to ignore obvious signs of economic dysfunction and interpret a warning sign as something positive.

    Furthermore Bush and Cheney were involved in the energy industry and Tillerson is a big Bush loyalist. So XOM and Big Oil were doing very well even while failing to increase supply of oil and natural gas—that should have been a huge red flag especially in light of War Room sessions involving Energy Department officials saying the words “ENERGY CRISIS”.

    Finally Bush invaded Iraq which had nothing to do with 9/11 and a CIA agent just published a memoir in which she states that the White House was pressuring agents to find “intelligence” linking 9/11 to Iraq. She states that pressure made it difficult for the CIA to do their job of protecting Americans from terrorist attacked because there was simply no intelligence going in that direction. War is not innocuous and can impact global markets and global trade.

  8. Gravatar of Ray Lopez Ray Lopez
    27. March 2020 at 15:07

    Sumner: “Ray, Are you stupid, or just dishonest?” – c’mon, this is getting old, the ad hominem. You could have said something dishonest like “I believe money is non-neutral in the short run but not in the long run”, without of course defining the long run. Instead you took the easy way out.

  9. Gravatar of msgkings msgkings
    27. March 2020 at 15:13

    @Ray Lopez:

    You’re the lamest troll ever. Your middle name is ad hominem. Ray Ad Hominem Lopez.

    Why do you say stuff that is such obvious bullshit? It’s very Trumpian.

    If you want anyone to engage you seriously, stop the troll act and discuss things.

  10. Gravatar of Willy2 Willy2
    27. March 2020 at 16:20

    – Steve Keen has pointed out that GDP is a VERY poor metric of gauging the economy. One good example is Australia. That country is already in a recession but one woudn’t know that when looking at the GDP figure. That’s still in a positive trend.

  11. Gravatar of Christian List Christian List
    27. March 2020 at 16:32


    concerning impersonations: have you seen Thomas Mundy, an ironworker from Long Island? He’s basically Trump 1:1. He comes really close regarding speaking style, accent, looks, gestures.

    Also kind of hilarious: Toddlers with tutus and tiaras, who are freaking out and who, with the help of deepfakes, get the face of Trump while talking.

    Ray, Are you stupid, or just dishonest?

    Go with stupid, and you are never wrong. I am amazed that in the second paragraph Ray more or less correctly presents the mechanism behind interest rates, but then he does not seem to understand what this means. Never mind, it’s hopeless. First you’d have to treat the personality disorder, but even a psychiatrist can’t do that. It’s untreatable.


    stop the troll act and discuss things.

    It’s a defense mechanism. He can’t discuss things normally out of fear that he might get hurt. He could be proven wrong and that would implode his ego and his low self-confidence. This is deeply rooted, I don’t think he can just turn it off.

  12. Gravatar of Thaomas Thaomas
    27. March 2020 at 17:29

    Does the Atlanta Fed use the TIPS spread? That ought to be a pretty current indicator

  13. Gravatar of Gene Frenkle Gene Frenkle
    27. March 2020 at 19:10

    Btw, I know very little about the Australian economy, but I just read that it had a 30 year economic expansion!?! So according to my hypothesis that means from 2001-2008 Australia should have had increasing production of either oil or natural gas…if not both natural gas and oil. Sure enough, Australia had increasing production of both oil and natural gas! So the capital directed at Australia during that period had quality investment opportunities unlike the capital that found its way to America which was in an energy crisis with no solution in sight. So if my theory is so stupid…why has my hypothesis not been proven wrong?

    And I just checked out New Zealand which had falling natural gas production and oil production 2001-2006, but then a new field was opened in 2007 and its energy crisis was solved. Articles seem to indicate NZ had a housing bubble but the prices recovered so quickly it looks like the prices fell because of the global recession and not any underlying dysfunction with the NZ economy…so that supports my hypothesis. Plus Googling “NZ energy crisis” turns up a hydro shortage in June 2008 due to drought. Like Canada hydro provides 75% of electricity so I don’t know how important natural gas is in NZ.

    Bottom line—from 2001-2008 economies had to have a way to deal with high oil prices, and because America is an energy intensive consumer spending economy our economy simply couldn’t process high energy prices. As an aside many of Puerto Rico’s problems (recession began in 2006 when oil prices were going up up and away) are due to high oil prices and its reliance on oil for transportation AND electricity…so fracking for natural gas couldn’t save it like it saved our economy in 2009.

  14. Gravatar of Benjamin Cole Benjamin Cole
    27. March 2020 at 20:24

    Taking potshots at public agencies is sport. I do my share.

    But see this, from yesterday.

    “Bloomberg US Recession Probability Next 12 Months 40.0% unch.”

    A 40% chance?

    And on Feb. 19 the S&P 500 hit an all-time high.

  15. Gravatar of rwperu34 rwperu34
    27. March 2020 at 20:43

    30 Year Treasury Yield

    Oct 19, 1987-10.25%
    Oct 20, 1987-9.49%
    Oct 21, 1987-9.44%
    Oct 22, 1987-9.15%
    Oct 23, 1987-9.11%

    Oct 26, 1987-8.94%
    Oct 27, 1987-9.04%
    Oct 28, 1987-9.14%
    Oct 29, 1987-9.08%
    Oct 30, 1987-9.03%

    From that point forward it was pretty stable with the continued downward march over the decades.

    For the first part of 1987 it looks like the range was about 8.5-9.0%. Then there was the run up that started in early Sept. It had popped over 10% for the first time in a couple of years and the spike the week before Black Monday is the last time it topped that number. It was between 7% and 10% with a flat or even slightly up trend line from mid 1986 through mid 1993.

  16. Gravatar of Gene Frenkle Gene Frenkle
    27. March 2020 at 20:49

    Ben Cole, a theme of my comments is that fiat money is in fact an illusion…but many things that make up our economy are very real. There is nothing illusory about energy and the first law of thermodynamics…and there is nothing illusory about a global pandemic and death. And although money is an illusion—MMT is limited by very real things like inflation, corruption, etc, i.e., human nature.

  17. Gravatar of Ray Lopez Ray Lopez
    27. March 2020 at 23:34

    @msgkings – how’s that restaurant closure affecting you and your loved ones? Not yet on the street? Try investing in a higher margin business next time…note I did not attack you personally. You’re welcome.
    @Christian List – dumb. Did you realize the second paragraph was from Sumner not me? Apparently not. And tell us, how long is the ‘short-run’ in monetarism (it’s a trick question, so ask somebody first)
    @Gene Frenkle – you sound like the typical poor boy who keeps harping about energy, a leatherneck, so 1970s. FYI energy is a declining share of GDP, been that way for at least a generation. Services rule the over-rated US GDP, FYI. The biggest surprise to US economists is that dramatic changes in the price of oil have little or no effect on GDP anymore. Different in oil producing nations like Saudi Arabia, Venezuela and Russia.
    @everybody – check out TC’s post today in MR. No sticky wages in the economy today. Refutes our host. It’s almost like TC, who created Dr. Sumner out of nothing, is like the Mary Shelley novel protagonist Dr. Victor Von Frankenstein (note the GERMAN surname) who created the monster by the same surname and later repudiates it. Does TC have second thoughts about creating Dr. Sumner by bringing him to the public eye? Seems that way to me, since TC seems to contradict Sumner a lot.
    If you enjoyed the above, feel free to respond, since they say trolls enjoy the limelight. I expect to hear from fellow troll Christian List. He’s too dumb to get the Straussian reference in this paragraph.

  18. Gravatar of Benjamin Cole Benjamin Cole
    28. March 2020 at 02:45

    Gene Frenkie: well, yes, but money is a funny thing.

    When the Spaniards brought little lumps of metal back from the New World, French workers migrated to Spain to work and labor for those little lumps of metal. The Spaniards brought something valuable back from the New World too, that was potatoes.

    People will work for a little slips of paper if that paper allows them to pay taxes. The same as little lumps of metal

    If labor is unutilized, activating labor makes sense.

  19. Gravatar of Benjamin Cole Benjamin Cole
    28. March 2020 at 04:33

    “Rhode Island’s governor said Friday that law enforcement officers will stop cars and knock on doors in coastal communities to identify people who’ve been to New York state, joining other states in restricting the movements of out-of-state visitors to slow the spread of coronavirus.

    Kentucky’s governor says he is considering closing the border between Kentucky and Tennessee, and checkpoints have been set up in the Florida Keys to restrict access.



  20. Gravatar of Benjamin Cole Benjamin Cole
    28. March 2020 at 04:38

    PANAMA CITY: “Four passengers have died aboard a cruise ship carrying scores of people with flu-like symptoms that has been stranded off the Pacific coast of South America for several days, the liner company said Friday.

    The Zaandam, with 1,800 passengers on board, is currently in Panama’s territorial waters, having been prevented from docking in several countries due to coronavirus fears.

    “Holland America Line can confirm that four older guests have passed away on Zaandam,” the Dutch-owned company said in a statement.

    “Yesterday a number of patients with respiratory symptoms were tested for Covid-19 and two individuals tested positive.”

    The Zaandam liner left Buenos Aires on March 7 and was supposed to arrive last Saturday at San Antonio, near Santiago in Chile.

    Since a brief stop in Punta Arenas in Chilean Patagonia on March 14, it was turned away from several ports after reporting that 42 people aboard were suffering from flu-like symptoms.

    It is trying to head to Florida, but to get there, it must pass through the Panama Canal. On Friday, authorities denied the ship access to the waterway.”



  21. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    28. March 2020 at 06:47

    From Yale’s Frank Snowden’s ‘Epidemics and Society’ (2019):

    “It would be perverse, for example, to discuss HIV/AIDS, the campaign to eradicate polio, the third pandemic of bubonic plague, modern cholera, or Ebola without considering their places of origin, their epicenters, and the nations where these afflictions still cause an immense burden of suffering and loss. We are inescapably part of a global world in which microbes—and the insects that transmit them—refuse to recognize political borders, and we need to take that carefully into account.”

    A few pages later comes:

    “Public health strategies: These strategies include vaccination, quarantine and sanitary cordons, urban sanitation, sanatoria, and “magic bullets” such as quinine, mercury, penicillin, and streptomycin. There is also the policy of concealment as a means to deny the presence of a disease, as China did at the onset of the SARS outbreak and as other national governments and municipalities have done over a long history.”

    Wow, who does he think he is, Donald Trump?

  22. Gravatar of Christian List Christian List
    28. March 2020 at 07:25

    Did you realize the second paragraph was from Sumner not me? Apparently not

    No, I didn’t see that because I only skim your posts very superficially, everything else is a waste of time.

    It’s also pointless to quote whole paragraphs, and even worse: doing it as badly and unrecognizable as you do.

    In my case you can see immediately what is quoted and what not, because I know how to use a computer.

    But you are right that paragraph really shocked me, because it would have been the first time you’ve written anything correct. I should have seen that coming. My honest mistake. Sorry.

  23. Gravatar of Gene Frenkle Gene Frenkle
    28. March 2020 at 07:49

    Ray Lopez, in 2020 energy is now behaving like any other commodity, but that simply wasn’t the case from 2001-2008. In fact the way Big Oil behaved from 2001-2008 is an argument against oligopoly and stock buybacks because Big Oil was plodding along growing fat and happy due to lazy conventional wisdom/groupthink which undermined our economy. I started reading Yergin’s “The Prize” but stopped reading it because I realized fracking had solved our energy crisis and energy would no longer negatively impact our economy…unfortunately the oil slowdown in 2016 ended up helping Trump get elected even though our economy was fundamentally sound.

  24. Gravatar of Michael Rulle Michael Rulle
    28. March 2020 at 09:30

    Re: 1987

    Interestingly, every “expert” actually was anticipating a substantial pullback in stocks. I had no idea if they were right for the wrong reason—but —stocks were up a lot for the year (about 30% through September) and the 10 year about -10% for the year. It was the first time I heard the statement (“the Bond market is always right”—no “never reason from a price change” back then)).

    Pullback is WAY different than what happened. For the first time I realized how much our “belief systems” matter—(for example, why do we trust that stocks are worth “anything”?)—no different really than the history of money (cows, Boulders in oceans, shiny metals, bits on computers).

    But, it was more like a large Tornado—plus, markets could not execute futures/cash arbitarge—-in part because of technololgy—so futures prices floated free from cash===but it was all over in a week. GDP was same as 1986, and lower than 1988–(mid 3’s to 4+)

  25. Gravatar of ssumner ssumner
    28. March 2020 at 09:39

    Thanks rwperu.

    Patrick, You said:

    Concealment and lies? You mean what Trump been doing for the past two months? His twitter feed is full of non-stop lies and misinformation.

  26. Gravatar of Michael Rulle Michael Rulle
    28. March 2020 at 09:48

    I’ve tended to agree with your 3% rule—-but I think that may be way to low. Which is not to say we can tell what kind of impact they have —-but 3% may as well be zero—-it could be right——but I don’t think so.

    Historians play that game all the time—-few believe in “great man” theory—but a decent minority do. Ghengis Kahn, Napolean seem unique. Lincoln too. While I go back and forth on Hitler—-I wonder who would have been so tactical in gaining power–not Ernst Rohm, certainly not Goering—Maybe Heydrich—but too young–and Himmler was nothing. Goebbels—just cannot see it—it still would have been chaotic for many years. FDR? No one wanted to go to war—but the ‘elites’ did—which of course was right (I think)—certainly Truman did not skip a beat.

    Thinking out loud

    Anyway—I will go with 3-80%—-except for the fact we can never tell which it is.

  27. Gravatar of Michael Rulle Michael Rulle
    28. March 2020 at 10:04

    re China and Virus

    I am beginning to believe the scariest stat of all on the Coronavirus is that China has reported “only 54 new cases”—-“all imported from abroad”

    If that is not frightening, not sure what is.

  28. Gravatar of Gene Frenkle Gene Frenkle
    28. March 2020 at 10:07

    Rulle, Senator Burr’s actions indicate the president deserves more than 3% of the blame, but the fact other countries are experiencing this means it is less than 80%. Republicans control the Executive Branch and the Senate, and we know for a fact Republican senators who were briefed by the Executive Branch were using words like “Spanish Flu” and selling off their stocks right around the time Mardi Gras was being celebrated in New Orleans. So I give them a pass on the Super Bowl but Mardi Gras should have been cancelled by the people we pay to protect us from existential threats—the federal government.

  29. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    28. March 2020 at 11:25

    “Patrick, You said:

    “Concealment and lies? You mean what Trump been doing for the past two months? His twitter feed is full of non-stop lies and misinformation.”

    Compared to whom, Nancy Pelosi…Hilary Clinton? Or the idiots in the news media who criticize Trump for saying it originated in China?

    At any rate, everyone should calm down and admit how little we know, as John Ioannides explains here:

  30. Gravatar of Peter McCluskey Peter McCluskey
    28. March 2020 at 11:44

    Oil was remarkably stable in October 1987, copper was more volatile, but that was a brief decline between months of an upward trend.

    Crude oil futures (for December 1987 delivery) in Oct 1987:
    871002 19.77
    871009 19.55
    871016 20.22
    871023 20.16
    871030 19.96

    Copper futures (December 1987 delivery) in Oct 1987:
    871002 81.5
    871009 84.9
    871016 87.9
    871023 81.7
    871030 82.15

  31. Gravatar of rwperu34 rwperu34
    28. March 2020 at 21:08

    @Michael Rulle, thanks. Always nice to get first hand accounts from back then. One of these days I may just head the library and read some random newspapers from Sept and Oct 1987.

  32. Gravatar of ssumner ssumner
    28. March 2020 at 21:24

    Patrick, I don’t see anyone criticizing Trump for saying it originated in China.

    Thanks Peter.

  33. Gravatar of Gene Frenkle Gene Frenkle
    29. March 2020 at 07:46

    Peter, the price of oil collapsed in 1986…which is also when the S&L Crisis would begin. So the S&L Crisis was very similar to the Housing Bubble except on a regional scale. So we weren’t in an energy crisis in the 1980s(we were in a glut and everyone knew Saudi Arabia could open the spigots at any time) in large part because efficiency gains were such low hanging fruit. Still, the oil profits wreaked havoc in our economy just like 2001-2008. So people like W Bush were trying find new oil production but simply failed. Natural gas production in America also plateaued during those years. So the oil profits wreaked havoc in the region they were made because our banking system was less advanced than in 2001.

Leave a Reply