GDPNow Forecast Dives To -1.0 Percent Following Income And...

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    GDPNow Forecast Dives To -1.0 Percent Following Income And Spending Data
    By Mish Shedlock of MishTalk
    Thursday, June 30, 2022 9:29 PM EDT


    GDPNow data from the Atlanta Fed, chart by Mish
    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.
    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

    Bloomberg Econoday consensus, highlights and annotations by Mish.

    I am not sure what some of these economists are smoking with expectations ranging all the way up to a 1.1% rise in PCE.
    We already had negative revisions to retail sales in May, so why would PCE rise?
    It didn't, in real terms. And as expected and announced by me in advance, we had negative revisions and then a weak report on top of it.
    The net result of all the activity since June 27 was a dive in the baseline estimate to -1.0 percent.
    However, and more importantly, the GDPNow forecast of Real Final Sales only declined to +1.5%.
    That's not recession territory if it holds, but why would it?
    Looking Ahead
    Looking ahead, I expect more weak numbers and more negative revisions.
    The second quarter ended today, But the data lags.
    We have a key ISM number next week, another retail sales report, more housing reports, and another personal income and outlays report.
    Look at the trend folks. Where is it headed? And there is still a month's worth of data coming in.
    Personal Income and Spending: The Latter Much Weaker Than Expected in May
    Meanwhile please note Personal Income and Spending: The Latter Much Weaker Than Expected in May
    Real PCE decreased 0.4 percent in May; goods decreased 1.6 percent and services increased 0.3 percent. And we had big negative revisions to April.
    I've Seen Enough, the US is in Recession Now
 
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