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GDPNow information from the Atlanta Fed, Chart by Mish.
Chart Notes
- The blue line is the bottom forecast. It is about all the general public sees or hears about when the BEA releases its GDP stories, however it is not what issues most.
- The crimson line is Real Final Sales (RFS). That is the underside line estimate for the economic system and what does matter most.
- The yellow line is RFS to home consumers
- The inexperienced line is RFS to non-public home consumers. It excludes authorities and exports.
Real Final Sales is the true backside line efficiency for the quarter. The distinction between the baseline report and RFS is inventories which web to zero over time.
Mainstream media follows the baseline quantity, not what issues most.
GDPNow Current Estimate
Please contemplate the ultimate replace to the GDPNow Forecast for 2022 This fall GDP.
The GDPNow mannequin estimate for actual GDP development (seasonally adjusted annual fee) within the fourth quarter of 2022 stays 3.5 p.c on January 20. The nowcast was unchanged after rounding following this morning’s report from the National Association of Realtors.
This is the final GDPNow forecast for the fourth quarter. The first GDPNow forecast for the primary quarter of 2023 will likely be on Friday, January 27.
Will GDPNow Hot Hand Continue?
Evolution of GDPNow Forecast from Atlanta Fed, annotations by Mish
The Blue Chip consensus is an costly proprietary subscription. The Atlanta Fed is ready to put up some outcomes with a lag.
December information (reported in January) has been depressing throughout the board. That doesn’t essentially matter. What does matter is what the info is vs what the fashions anticipated.
We don’t know what the Blue Chip anticipated.
What If?
The GDP mannequin has a extremely popular hand in 2022. But traditionally, it has had some fairly large misses on occassion.
If we assume the Blue Chip forecast declines only a bit on the current stories and downward revisions on retail gross sales and industrial manufacturing, that will put its estimate at roughly 1.5 p.c.
Q: Is that recession territory?
A: Yes, as a result of it is a baseline forecast and that is not what issues.
There is 1.5 proportion factors between the GDPNow baseline forecast and Real Final Sales. Subtract 1.5 proportion factors from the Blue Chip estimate and you might be proper at zero with extremely weakening information throughout the board.
New Home Sales Cancellations
The cancellation fee for KBH was a tremendous 68 p.c.
Scroll to Continue
The New Home Sales Report Is Another Negative Revision Swamp in November
New Home Sales information from the Census Department, chart by Mish
November Revisions
- August from 661,000 to 646,000
- September from 580,000 to 559,000
- October from 632,000 to 605,000
Recall my put up on December 23, The New Home Sales Report Is Another Negative Revision Swamp in November
Negative Groundhog Day
Those revisions are on high of adverse revisions in October and September, now lowered once more.
Is this a joke or what? Negative groundhog day maybe?
What About Cancellations?
The Census Department doesn’t subtract cancellations from its stories and cancellations as a result of rising mortgage charges have been enormous.
To repeat, none of those revisions embrace cancellation and cancellation charges have been as excessive as 25 p.c! [Make that as high as 68 percent]
In declining gross sales environments and financial downturns (now), the Census Department dramatically overstates gross sales, even when we ignore revisions.
In financial upturns, the Census Department understates gross sales.
Revisions
At financial turns, count on revisions. Heading into recessions, all the revisions fee to be adverse.
Expect to see adverse revisions on jobs, extra adverse revisions on retail gross sales, and big errors on new residence gross sales that won’t even be revised as a result of the reporting methodology is outright flawed.
I’ll do a observe-up put up later this weekend together with a dialogue with bond guru Lacy Hunt on the timing of the recession.
Meanwhile, observe one other enormous stock construct (assuming GDPNow is right on that rating), smack within the face of vastly weakening information throughout the board.
Wonderland Economy
Cast of Characters
- Mad Hatter: Jerome Powell, Fed Chair
- Red Queen: Janet Yellen, Treasury Secretary
- March Hare: John Kerry, U.S. Special Presidential Envoy for Climate
- Humpty Dumpty: President Biden
- Alice: You resolve
In case you missed it, please see my Wonderland expertise Alice Debates the Mad Hatter and the Red Queen on Timing the Recession.
This put up originated at MishTalk.Com.
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