Peering into the present: the Bank’s approach to GDP nowcasting

Quarterly Bulletin 2017 Q2 article

Published on 16 June 2017

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.