Forecasting GDP Growth with NIPA Aggregates
Beyond GDP, which is measured using expenditure data, the U.S. national income and product accounts (NIPAs) provide an income-based measure of the economy (gross domestic income, or GDI), a measure that averages GDP and GDI, and various aggregates that include combinations of GDP components. This paper compiles real-time data on a variety of NIPA aggregates and uses these in simple time-series models to construct out-of-sample forecasts for GDP growth. Over short forecast horizons, NIPA aggregates—particularly consumption and GDP less inventories and trade—together with these simple time-series models have historically generated more accurate forecasts than a canonical AR(2) benchmark. This has been especially true during recessions, although we document modest gains during expansions as well.
Garciga, Christian, and Edward S. Knotek II. 2017. “Forecasting GDP Growth with NIPA Aggregates.” Federal Reserve Bank of Cleveland, Working Paper No. 17-08. https://doi.org/10.26509/frbc-wp-201708