GDPNow Forecast Dives to -1.0 Percent Following Income and Spending Data

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by Mish Shedlock, Mish Talk:

The GDPNow forecast plunged from +0.7 percent to -1.0 percent today. It’s ugly but not as bad as it looks, at least yet.

The Atlanta Fed GDPNow Model forecast took yet another dive today.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is -1.0 percent on June 30, down from 0.3 percent on June 27. After recent releases from the US Bureau of Economic Analysis and the US Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and real gross private domestic investment growth decreased from 2.7 percent and -8.1 percent, respectively, to 1.7 percent and -13.2 percent, respectively, while the nowcast of the contribution of the change in real net exports to second-quarter GDP growth increased from -0.11 percentage points to 0.35 percentage points.

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The previous forecast was on June 27 at 0.3 percent. The model rose from 0.3 percent to 0.7% on June 28 on Advance Economic Indicators (inventories and international trade in goods).

What Matters 

The overall number is not what matters although the -1.0 percent estimate looks ugly.

What does matter is real final sales. The rest is inventory adjustment that nets to zero over time. That number is still an acceptable 1.5 percent, assuming it holds.

But how likely is that?

All About Revisions 

I have been harping for two month that I expect negative revisions.

We subsequently had negative revisions to retail sales and today to personal consumption expenditures.

Are CFO’s in la-la land expecting positive GDP?

At least, they are not telling us the “Consumer is Strong.”

Personal Income and Outlays 

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