Peering into the Present: The Bank's Approach to GDP Nowcasting

13 Pages Posted: 20 Jul 2017 Last revised: 3 Aug 2017

See all articles by Nikoleta Anesti

Nikoleta Anesti

Bank of England

Simon Hayes

Bank of England

Andre Moreira

Bank of England

James Tasker

Bank of England

Date Written: June 16, 2017

Abstract

The Bank’s GDP nowcast represents the Monetary Policy Committee’s (MPC’s) estimate of economic growth in the current quarter, before official data become available. The nowcast is informed by statistical models, but is ultimately judgemental, reflecting all available information.

Users of nowcasts must be aware of the degree of accuracy that can be expected, as this varies across models and time. Models based on survey information tend to be more accurate early in the quarter, whereas high‑frequency output data published by the ONS become more useful later.

The MPC’s Inflation Report nowcasts have been relatively accurate, with a root mean squared error of 0.3 percentage points over the past ten years - lower than a mechanical use of the models could have attained. GDP growth estimates have fallen within 0.1 percentage points of the MPC’s expectation about half the time, although much larger surprises have occasionally occurred.

Suggested Citation

Anesti, Nikoleta and Hayes, Simon and Moreira, Andre and Tasker, James, Peering into the Present: The Bank's Approach to GDP Nowcasting (June 16, 2017). Bank of England Quarterly Bulletin 2017 Q2. Available at SSRN: https://ssrn.com/abstract=3004471

Nikoleta Anesti (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Simon Hayes

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Andre Moreira

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

James Tasker

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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