The Federal Reserve Bank of New York announced the relaunch of the New York Fed Staff Nowcast through its Applied Macroeconomics and Econometrics Center (AMEC). The Staff Nowcast shows the evolution of the “nowcast” and the impact of new data releases.
While current GDP estimates are only published quarterly and released with a lag, the New York Fed Staff Nowcast provides a real-time assessment of economic activity. Following suspension in September 2021 due to uncertainty around the COVID-19 pandemic, the relaunched model seeks to address some of the challenges posed by that event.
The relaunched New York Fed Staff Nowcast builds flexibility into the model through two new features: time-varying parameters that allow the volatility of different components to evolve over time; and non-normal distributions that enable the detection of outliers in real time. These features help to handle greater volatility in the data, as well as reduce the model’s sensitivity to large shocks.
“The New York Fed Staff Nowcast allows us to track the evolution of economic activity in real time, while the new features significantly improve the forecasting performance of the model,” said Martín Almuzara, research economist in the New York Fed’s Macroeconomic and Monetary Studies division, in a statement. “While the pandemic posed challenges to the New York Fed Staff Nowcast’s estimation, the new features leverage recent developments in time-series econometrics to create a more robust and flexible model.”
The input data to the New York Fed Staff Nowcast incorporate information from several economic indicators and surveys, including data on retail sales, industrial production, the labor market, and trade.
“The New York Fed Staff Nowcast is intended to help policymakers, business leaders, consumers, analysts, and anyone trying to get a better understanding of the current state of the economy in real time,” said Argia Sbordone, head of Macroeconomic and Monetary Studies at the New York Fed, in a statement.