Please consider the GDPNow forecast for August 10.
The GDPNow model’s estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 2.5% on August 10, down from 1.4% on August 4. Following recent releases from the US Bureau of Labor Statistics and the US Census Bureau, the nowcast for real growth in personal consumption expenditure in the third quarter, real growth in gross private domestic investment in the third quarter, and growth actual government spending in the third quarter increased from 1.8% to 2.7%, from -0.3% to 0.2% and from 1.4% to 1.7%, respectively, while the nowcast the contribution of the change in real net exports to real GDP growth in the third quarter fell from 0.35 percentage point to 0.30 percentage point.
Look at actual final sales
The figure to watch is actual final sales, not GDPNow’s base estimate. The difference between the numbers is the inventory adjustment that stacks up to zero over time.
RFS is the bottom line estimate for the economy.
A large part of GDP changes very little throughout the quarter (military spending, health insurance, social security, food stamps, etc.)
It is the cyclicals (durables and housing) that tend to drive booms and busts.
Why the jump
The last GDPNow forecast was August 4.
The jump was not due to today’s CPI report, but rather the August 5 Blowout Jobs report.
Calling BS for Second Consecutive Amazing Jobs Report, Understand Why
On August 5, I commented on Calling BS in the second consecutive Amazing Jobs report, Understanding Why
Synopsis since March
- Employment -168,000
- Jobs +1,680,000
The household numbers are certainly loud, but a five-month divergence now stands out.
In expanding economies, the gaps tend to resolve higher. In turn, the gaps tend to resolve lower.
Scroll to continue
I suspect that labor turnover and retirements have seriously distorted the payroll and at least some of that strength will be removed.
Anyway, I’m calling BS. At least one set of numbers is seriously wrong.
Models don’t think
Models don’t think. Humans can, perhaps mistakenly.
The baseline job count doesn’t match Amazon’s 200,000 layoffs, consumer sentiment, rising jobless claims (albeit from record lows), warnings from retailers such as Walmart and Target, layoffs at Walmart, and two warnings from Micron about the demand for computer chips.
I sense huge revisions to work numbers. If so, this forecast jump will be short-lived.
There are three upcoming retail sales reports and a myriad of housing reports. These will hold the key to the third quarter, not the July jobs report.
Housing will be another big bust this quarter. And the rate of durable goods will follow housing. Crafting rates will be negative.
Hopes for the quarter rest solely on consumer spending and lower inflation. But don’t count on strong retail sales.
Add it all up and you have a third quarter of negative GDP.
This post is from MishTalk.Com.
Thanks for listening!
Please subscribe to MishTalk email alerts.
Subscribers receive an email alert of each message as it occurs. Read the ones you like and you can unsubscribe at any time.
If you are subscribed and not receiving email alerts, please check your spam folder.