Real-Time Nowcasting of GDP: Factor Model versus

This paper performs a fully real-time nowcasting (forecasting) exer-cise of US real gross domestic product (GDP) growth using Giannone, Reichlin and Small (2008) factor model framework which enables one to handle unbalanced datasets as available in real-time. To this end, we have constructed a novel real-time database of vintages from Octo-ber 2000 to June 2010 for a rich panel of US variables, and can hence reproduce, for any given day in that range, the exact information that was available to a real-time forecaster. We track the daily evolution throughout the current and next quarter of the model nowcasting per-formance. Analogously to Giannone et al. (2008) pseudo real-time results, we find that the precision of the nowcasts increases with infor-mation releases. Furthermore, the Survey of Professional Forecasters (SPF) does not carry additional information with respect to the model best specification, suggesting that the often cited superiority of the SPF, attributable to judgment, is weak over our sample. Then, as one moves forward along the real-time data flow, the continuous updat-ing of the model provides a more precise estimate of current quarter GDP growth and the SPF becomes stale compared to all the model specifications. These results are robust to the recent recession period