-Source-NPR-
President Trump is eager to tout a fast-growing economy, boosted by the tax cuts he pushed through Congress. That makes Friday morning's report on gross domestic product a highly anticipated news event.
Did GDP growth top 4 percent in the second quarter — more than double the first-quarter pace — as many economists project?
Forecasts are all over the board, with estimates even among Federal Reserve economists diverging widely.
The events of 10 years ago show why these forecasts are so important.
The New York Federal Reserve Bank, for instance, uses a statistical model called the Nowcast to predict where the economy is going. Back-testing the model has shown that, had it been around in 2008, it would probably have predicted the Great Recession, giving Fed officials a bit more time to prepare for it, says New York Fed economist Andrea Tambalotti.
In the back-testing, he says, "all the data turned negative quite quickly and quite abruptly. And the Nowcast picked that up. And when you see the Nowcast sort of plunging, you know that something is wrong."
The Nowcast was once only released internally, but a couple years ago Fed officials began publishing it online.
"We think that it's helpful for the public at large to see this number and understand what we do," Tambalotti says. Read more
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