Keep in mind the GDPNow forecast as of August 10.
The GDPNow model estimates real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 2.5 percent on Aug. 10, up from 1.4 percent on Aug. 4. Following recent releases from the U.S. Bureau of Labor Statistics and the U.S. Census Bureau, the current growth in real personal consumption expenditure in the third quarter, real private domestic investment growth in the third quarter, and real government spending growth in the third quarter. the third quarter increased from 1.8 percent to 2.7 percent, -0.3 percent to 0.2 percent and 1.4 percent to 1.7 percent, while the current contribution of change in real net exports to real GDP growth in the third quarter fell from 0.35 percentage point to 0.30 percentage point.
View real final sale
The number to look at is Real Final Sales, not the baseline GDPNow estimate. The difference between the numbers is the inventory adjustment that nests to zero over time.
RFS is the bottom-line estimate for the economy.
Much of GDP changes very little during the quarter (military spending, health care, social security, food stamps, etc.)
They are cyclical stocks (durable goods and housing) that tend to drive expansions and recessions.
Why the jump?
The last GDPNow forecast was on August 4.
The jump wasn’t due to today’s CPI report, but rather the August 5 job burst report.
I call BS on the second consecutive report on great jobs, understand why
On August 5, I said I’m calling BS in the second consecutive Amazing Jobs report, understand why
Synopsis Since March
- Employment -168,000
- Jobs + 1,680,000
Although the household numbers are noisy, a difference of five months is now noticeable.
In growing economies, discrepancies usually resolve higher. On turns, discrepancies tend to get solver lower.
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I suspect that staff turnover and retirements have seriously disrupted payrolls and at least some of this power will be taken away.
Anyway, I’m calling BS. At least one set of numbers is seriously wrong.
Models don’t think
Models don’t think. People can, perhaps wrongly.
Baseline job numbers don’t match 200,000 Amazon layoffs, consumer confidence, rising unemployment claims (albeit from record levels), warnings from retailers such as Walmart and Target, layoffs at Walmart, and two warnings from Micron on demand for computer chips .
I can smell massive revisions to the track numbers. If so, this forecast jump will be short-lived.
There will be three retail sales and a large number of housing reports. Those will be key to the third quarter, not the July jobs report.
Housing will be another major failure this quarter. And durable goods follow housing construction. Production rates are negative.
Hopes for the quarter rest solely on consumer spending and falling inflation. But don’t count on strong retail sales.
Add it all up and you have a third quarter of negative GDP.
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