GDPNow Initial Estimate is Way Too Optimistic


The initial estimate of the GDPNow Model for second-quarter GDP is -12.1%. That's way too high.

The final GDPNow estimate for first-quarter GDP was -1.0%. 

Yesterday, the BEA's first estimate if first-quarter GDP was -4.8%, a huge miss for the model.

Looking ahead, the model is off to a bad start for the second quarter.

Latest estimate: -12.1 percent — April 30, 2020

The initial GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2020 is -12.1 percent on April 30. The initial estimate of first-quarter real GDP growth released by the U.S. Bureau of Economic Analysis on April 29 was -4.8 percent, 3.8 percentage points below the final GDPNow model nowcast released on April 28.

Nowcast Wildly Optimistic

Nowcast Wildly Optimistic 2020-04-30

The New York Fed Nowcast model estimates a wildly optimist -7.79% for second-quarter GDP with -0.4% for the full year. 

Both estimates are ridiculous.

The Blue Chip Consensus

Judging from the first chart, the Blue Chip estimate is about -24%. That a more realistic number. 

Everyone's Guessing, Even the Fed: How Deep the Recession?

On April 8, I commented Everyone's Guessing, Even the Fed: How Deep the Recession?

If you are looking for guesses, here's another one: U.S. GDP will contract 30% in second quarter, 5% in 2020

What's Next for America?

For a 20-point discussion of what to expect, please see Nothing is Working Now: What's Next for America?

No V-Shaped Recovery

Here's the correct viewpoint: The Covid-19 Recession Will Be Deeper Than the Great Financial Crisis.

Simply put, a quick return to business as usual is not in the cards.

Inflation or Deflation?

Meanwhile, the debate over inflation or deflation continues. 

Will it be Inflation or Deflation? 

If you believe the answer is inflation, then you do not understand the importance of credit and demand shocks. Click on the link for discussion.

Mike "Mish" Shedlock

Comments (14)
No. 1-10
Tony Bennett
Tony Bennett

"Yesterday, the BEA's first estimate if first-quarter GDP was -4.8%"


The final revision for this number is years away.

Bet the house this number won't look at all like end result.

Economists guesses are usually way off at inflection points.


Boeing junk bond oversubscribed. 25 billion dollars. Where is this deflation?

Guys, anyone seeing Mr Deflation, please contact me ASAP.


Kind of a meaningless number. This number will change because we aren't even midway into Q2.


If we weren't so overleveraged we wouldn't have such wild swings in GDP. It's like our economy is a penny stock priced for perfection.


The largest export categories for the US are Food, Airplanes, Heavy Equipment, and Automobiles.

Every category with the exception of food is going to basically non existent as there is going to be zero demand for those products worldwide.

This is going to have a huge impact on GDP. Our domestic consumption is based almost entirely on debt, and I do not really see people's confidence being high enough to drive them to take on new debt going forward until we begin to see improvement in the employment picture.

The stock market is the Titanic after hitting the iceberg, but before anyone thought it was a problem.


Simplest analysis

past quarter...2/14 weeks shutdown = -4.8%

next quarter...5 weeks of same shutdown (5 @ 2.4%) and 9 weeks of partial shutdown (9 @ 1.2%) = -23.5%

As valid as any other projection.


doesn't demand shock lead to higher prices due to a company's fixed costs and the need to be profitable? So much production going off line for a temporary phenomenon. Higher prices without considering monetary inflation.


I came up with 25% too. It was based on optimistic assumptions that weekly initial unemployment claims will be 200K, and after re-opening, the economy would be at 0% growth compared to late May / June of last year.

George Phillies
George Phillies

-30% in Q2, -5% overall? That requires +what in Q3 and Q4?

Also, vast numbers of Americans have just been schooled on why you want 6months of income in the bank. A reasonable guess is that they are going, once they get jobs back, to scramble to liquidate debts and get that 6 months in the bank, rather than spending.


Could it be that the Atlanta Fed does not want to panic the public with a much more dire forecast. Last fall the Fed let everyone know they will do what was needed to stabilize the repo market. Then they very quietly expanded their balance sheet over one trillion dollars. At that time I felt that Powell was seeing something that he was very concerned about. They never fully explained the reasons for their monetary actions. The Atlanta Fed should know that if they came out with a forecast of -25 to 35% GDP for the second quarter it could cause a panic and I would expect another strong downward leg and a new low in the major stock indexes.

Global Economics