Nowcasting of advance estimates of personal consumption of Services in the U.S. National Economic Accounts: Individual vs forecasting combination approach

Abstract

As part of continuing effort to research statistical methods for producing timely and accurate early estimates of national accounts statistics, this paper evaluates the ability of individual nowcasting and forecast combination techniques to reduce revisions in the first or advance estimates of U.S. quarterly personal consumption of services at the most detailed component level. At such a level, designated indicators for advance estimates are those directly relevant to the detailed components. Using the same indicators that were used in routine compilations, we show in a real time setting that nowcasting methods are able to reduce revisions in the advance estimates in over 90 percent of the detailed components, and the upper bound of the reductions reached over 60 percent. We evaluate the performances of all methods by comparing their root mean squared revisions for each component. Our study suggests that nowcasting techniques are potentially a powerful tool to reduce revisions in the early estimates in the national account statistics at the most detailed level.