Better news on housing construction plus a methodological improvement pushes up the forecast
But Fed projections are slightly worse
The Current Quarter model’s projection is up to 0.5% compared to just 0.1% last week. There are two main contributors to the change:
The model got a lift from housing construction data. Housing construction will contribute to GDP in Q2 despite the decline starts in May.
I refreshed the time series model for intellectual property investment. Previously, this was forecast at 2.2% for Q3, which is unusually low. The new forecast of 6.2% is in line with the recent past. There are few monthly indicators for this series, and the BEA Handbook of Methods mentions a lot of “judgemental adjustment” required to estimate things like own-account software investment, on a quarterly basis. That suggests that large changes in this series are unlikely. (Don’t worry about usig this data: better data is available later and for annual estimates, so the general picture is accurate).
In contrast, the Fed data is a bit weaker. In the case of the Atlanta Fed, it’s a lot weaker, 1.5% instead of 2.2% All of the models are now pointing to a number that may be interpreted as “weak.” Don’t make that mistake; GDP of 1.0% is quite reasonable given the recent growth of the economy. An economy in equilibirum will show some slow quarters, but that doesn’t mean a recession is imminent. The employment report of over 200,000 jobs gained is quite amazing. The ability of the US economy to continue growing, and creating jobs at this rate, is something that should be celebrated.
See the full report for details.
Interesting! Which part of housing led to the growth upgrade—resi investment? starts? something else?