Do provisional estimates of output miss economic turning points?

Initial estimates of aggregate output and its components are based on very incomplete source data, so they may not fully capture shifts in economic conditions. In particular, if those estimates are based partly on trends in preceding quarters, provisional estimates may overstate activity when actual output is decelerating and understate it when actual output is accelerating. We examine this issue using the Real Time Data Set for Macroeconomists, which contains contemporaneous estimates of GNP or GDP and its components beginning in the late 1960s, as well as financial-market information and other data. We find that provisional estimates tend to partially miss accelerations and decelerations. We also consider whether better use of contemporaneous data could improve the quality of provisional estimates. We find that provisional estimates do not represent optimal forecasts of the current estimates, but that the improvement in forecast quality from including additional data appears to be quite small.