GDPNow forecast dips to -1.0% after revenue and spending data

The GDPNow forecast dipped from +0.7% to -1.0% today. It’s ugly but not as bad as it sounds, at least for now.

Atlanta Fed GDPNow data, chart by Mish

The Atlanta Fed’s GDPNow model forecast plunged further today.

The GDPNow model’s estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is -1.0% on June 30, down from 0.3% on June 27. Following recent releases from the US Bureau of Economic Analysis and the US Census Bureau, nowcasts for second-quarter real personal consumption expenditure growth and real gross private domestic investment growth fell 2.7% and -8.1%, respectively, to 1.7% and -13.2%, respectively, while the nowcast contribution from the change in real net exports in the second quarter, GDP growth fell from -0 .11 percentage points to 0.35 percentage points.

The previous forecast was June 27 at 0.3%. The model fell from 0.3% to 0.7% on June 28 on leading economic indicators (stocks and international trade in goods).

What matters

The total number isn’t what matters, although the -1.0% estimate looks lousy.

What matters are the real final sales. The remainder is an inventory adjustment that returns to zero over time. This number is still an acceptable 1.5%, assuming it holds.

But what is the probability?

All about revisions

I have been repeating for two months that I expect negative reviews.

We then had negative revisions on Retail Sales and today on Personal Consumption Spending.

Are CFOs in la-la land expecting positive GDP?

At least they don’t tell us that “the consumer is strong”.

Personal income and expenses

Bloomberg Econoday consensus, highlights and annotations by Mish.

I don’t know what some of these economists are smoking with expectations of as much as a 1.1% increase in the PCE.

We’ve already had negative retail sales revisions in May, so why would the PCE rise?

It was not, in real terms. And as expected and announced by me in advance, we had negative reviews and then a weak report on top of that.

The bottom line for all activity since June 27 was a drop from the base estimate to -1.0%.

However, and more importantly, the GDPNow forecast for actual final sales only declined to +1.5%.

It’s not recession territory if it holds, but why would it be?

Look forward

Looking ahead, I expect lower numbers and more negative reviews.

The second quarter ended today, but the data is lagging.

We have a key ISM number next week, another retail sales report, other housing reports, and another personal income and spending report.

Watch trending people. Where is he going ? And there’s another month of data coming in.

Personal income and expenses: the latter much weaker than expected in May

Real PCE fell 0.4% in May; goods decreased by 1.6% and services increased by 0.3%. And we had big negative reviews in April.

I’ve seen enough, the United States is in a recession now, questions and answers on why

On June 22 I commented I’ve seen enough, the US is in a recession now, Q&A on why

This report and the BEA’s negative revision to Q1 GDP reinforce my belief that the recession started no later than May.

It is possible that a recession started in the first quarter given the negative BEA GDP revisions,

On June 29, I commented The odds of a recession starting in the “first” quarter of 2022 just jumped

Despite a huge negative revision in the first quarter, I still stick with May at the start of the recession. See the links above for an explanation.

Powell: “We better understand how little we understand about inflation”

In case you missed it, please check out Powell: “We Better Understand How Little We Understand Inflation”

Powell: “Is there a risk that we are going too far? There is definitely a risk. The biggest mistake to make, let’s put it this way, would be not to restore price stability.

Powell pledged to whip inflation even at the expense of recession. This means that a recession is now baked into the cake, sooner rather than later.