Last estimate was +0.6%. Actual +0.5%

The results for the 1st quarter GDP (first read) is in and the GDP came in at +0.5%. The market economists estimates on Bloomberg and Reuters both called for +0.7%.

An estimate that has gotten more and more attention is the Atlanta GDPNow estimate. This estimate is a running estimate through the quarter. I am not sure how much data it needs to start the estimate but as the quarter goes on, and data is released, they plug it in their model and get an estimate. By the end, which was yesterday, they have all this data and the final value should equal the actual number. That is the theory. Once the 1st estimate for GDP is released, that is it for the tracking. They don't estimate revisions.

The last estimate for GDPNow released yesterday showed a final estimate of +0.6%. So overall, they were off by 0.1% and closer to the estimates of the economists surveyed. Good job. However, how is their track record.

Below are how the Atlanta Fed last estimate matched up with the 1st cut of the GDP released by the BEA in the past. (prior to today) I also include the estimates from the Bloomberg survey of economists. This is how it all stacks up for the prior 7 quarters of data.

  • 4Q 2015: Atlanta Fed estimate was 1.0%. The actual 1st cut of the GDP was 0.7%.. Atlanta overstated by 0.3% The Bloomberg estimate was +0.8% (overstated by +0.1%). Economist win.
  • 3Q 2015: Atlanta Fed estimate was 1.1%. The actual 1st cut of the GDP was 1.5%.. Atlanta understated by -0.4%. The Bloomberg estimate was 1.6%. (overstated by +0.1%). Economists win.
  • 2Q 2015: Atlanta Fed estimate was 2.4%. The actual 1st cut of the GDP was 2.3%. Atlanta overstated by 0.1%. The Bloomberg estimate was 2.5% (overstated by +0.2%). GDPNow wins.
  • 1Q 2015: Atlanta Fed estimate was 0.1%. The actual 1st cut of GDP was +0.2%.. Atlanta understated by -0.1%. The Bloomberg estimate was 1.0% (overstated by +0.8%). GDPNow wins.

SO for 2015, the Atlanta Fed was feeling good in Q1 and Q2 as they were only off by 0.1% on both occasions. In the 2H of the year - not so good as they were off by 0.3% and 0.4% respectively, and did not beat the economists.

How about 2014?

For 2014

  • 4Q 2014: Atlanta estimate was 3.5%. The actual 1st cut of GDP came in at 2.6%. Atlanta overstated by 0.9%. The Bloomberg, estimate was 3.0% (overstated by 0.4%). Economist win.
  • 3Q 2014: Atlanta, estimate was 2.7%. The actual 1st cut of GDP came in at 3.5% .Atlanta understated by -0.8%. The Bloomberg estimate came in at 3.0% (understated by -0.5%). Economist win.
  • 2Q 2014; Atlanta , estimate was 2.7%. The actual 1st cut of GDP came in at 4.0% . Atlanta understated by -1.3%. The Bloomberg estimates was 3.0% (understated by -1.0%). Economists win.

That is the all the data I could get from the website (or so it seems).
So from the limited data (7 prior quarters), the Atlanta Fed:

  • Got within +/-0.1% on two separate occasions. Both were in 2015.
  • The largest miss was a 1.3% miss in the 2Q of 2014
  • In 2015 they did much better than with an average miss of 0.225% for the 4 sample points.
  • In 2014, the average miss was 1.0% for the 3 sample points

How did the Bloomberg estimates do vs. the actual?

  • Economists got within +/- 0.1% on two separate occasions. This was the same as the Atlanta Fed.
  • The largest miss was a 1.0% miss in the 2Q of 2014. This was the same quarter that the Atlanta Fed missed by the most (1.3% miss). The Bloomberg economists were closer.
  • The 2015 average miss for the Bloomberg economists estimate was 0.3%. The Atlanta Fed missed by 0.0225%. Advantage Atlanta Fed in 2015.
  • The 2014 average miss for the Bloomberg economists estimate was 0.633%. This was better than the Atlanta Fed which was off by 1.0% in 2014 on average. Advantage economist in 2014.

What can I conclude?

Well, the Atlanta Fed has gotten within 0.1% on 3 of the last 5 estimates. That is pretty good. Whether they tweaked their model vs 2014, I don't know. However, if their estimates are believable, it can be used by traders to determine overall economic strength and weakness of the US economy as the quarter progresses and it could be a fundamental clue for bullish or bearish bias.

Now that Q1 is out, on to Q2. I know the Fed is hoping for something a bit better than what has happened so far in 2016.