Federal Reserve Bank of New York announced Friday that it was halting the publication of its GDP Nowcast model’s read of the economy due to pandemic-related uncertainties.
“The uncertainty around the pandemic and the consequent volatility in the data have posed a number of challenges to the Nowcast model. Therefore, we have decided to suspend the publication of the Nowcast while we continue to work on methodological improvements to better address these challenges,” the New York Fed said in a statement posted to its website.
The Nowcast for second-quarter growth came in at 3.2 percent, far below the advance estimate for growth of 6.5 percent and the revised estimate of 6.6 percent. The first quarter estimate was much closer, coming in at 6.66 percent compared with the revised estimate of 6.4 percent. Fourth quarter of 2020 was for 2.58 percent, below the revised estimate of 4.4 percent.
Many attempts to forecast economic data have been thrown off by the unusual dynamics of the pandemic. Many models undershot the recovery in the spring, undershot inflation, and recently have over-estimated economic strength. Citi’s Economic Surprise Index — which measures the degree to which economic data is either beating or missing expectations — went from a very positive reading, indicating upside surprises, to negative, indicating downside surprises.
The last reading of the Nowcast, published last week, was for 3.8 percent economic growth, well below the median forecasts of most Wall Street economists.