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GDPNow Forecast for 2023 Q1 Dives to 1.1 Percent, the BEA Reports Thursday

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20 comments on GDPNow Forecast for 2023 Q1 Dives to 1.1 Percent, the BEA Reports Thursday

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GDPNow data from the Atlanta Fed, chart by Mish

Please consider the GDPNow Forecast for 2023 Q1 as of April 26, 2023.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2023 is 1.1 percent on April 26, down from 2.5 percent on April 18. After recent releases the US Census Bureau and the US National Association of Realtors, the nowcasts of first-quarter real personal consumption expenditures growth and first-quarter real gross private domestic investment growth decreased from 4.2 percent and -5.8 percent, respectively, to 2.7 percent and -8.0 percent, while the nowcast of the contribution of the change in real net exports to first-quarter real GDP growth increased from 0.26 percentage points to 0.30 percentage points.

What Happened 

As I have commented before, expect more revisions, and expect them to be negative heading into recessions. 

Coming out of recessions, revisions tend to be positive. 

GDP Notes

Real Final Sales is the true bottom estimate of the economy. The rest is inventory adjustment that nets to zero over time. 

2.8 percent real final sales is not recession territory. But is that GDPNow estimate accurate?

We find out tomorrow, well sort of, because we also need to see Gross Domestic Income (GDI) that is very delayed.

Real Income Was Negative in 2022 Q4, Big Negative Revisions to GDP

Real Gross Domestic Product (GDP) and Real Gross Domestic Income (GDI) 2022 Q4

GDP vs GDI

Gross Domestic Product (GDP) and Gross Domestic Income (GDI) are two measures of the same thing, 

GDI is delayed for many months so we will not know its take for a while. It is signaling recession or verge of recession. GDP isn’t. 

If GDP is revised to match GDI, and GDI is weak in 2023 Q1, a recession has begun. This is not all that unlikely, but nor is it certain.

This post originated on MishTalk.Com.

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Mike Shedlock

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20 Comments
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shamrock
shamrock
3 years ago
GDPNow nailed it right on the head, the first official estimate comes in at 1.1%. However, inventory shrinkage knocked 2.2% off that number, and we all know inventories average out to 0 over time.
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shamrock
shamrock
3 years ago
Reply to  shamrock
Consumer spending was up about 3.7%. Very strong.
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Robbyrob
Robbyrob
3 years ago
Does Monetary Policy Matter? The Narrative Approach after 35 Years
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Salmo Trutta
Salmo Trutta
3 years ago

The distributed lag effect of long-term money
flows, the volume and velocity of money, the 24-month roc, the proxy for
inflation, is still historically high. And its roc trajectory comes down to
normal or historically proportional levels by the 4th qtr. this year.
But proportionality is affected by the transaction’s velocity of money, debits
to deposit accounts, which Greenspan discontinued in September 1996 (the G.6
release). Nowadays, I need a disclaimer.
The roc in the proxy for real output, R-gDp, is positive for the 1st qtr., but
could become negative in the 2nd qtr. (if money growth stalls). TBD
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Salmo Trutta
Salmo Trutta
3 years ago
What’s interesting is that Shadow stats reports that “Basic M1” (Currency plus Checking) jumped to a new 53-year high of 35.0% of the aggregate Money Supply M2.”
That implies that the velocity of money is steadily increasing.
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tractionengine
tractionengine
3 years ago
I’d love to know why Mish pays any attention to the GDPNow forecast. It adds nothing that we don’t already know from other sources and he keeps telling us how it’s forever changing and therefore worthless. My forecasts from tealeaves offer the same value and they cost the public nothing. Unlike the FED, my forecasts will be worth exactly what you (the public) pay for them and that’s a forecast you can bet on.
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Jack
Jack
3 years ago
Reply to  tractionengine
Interested to hear what your tea leaves are forecasting.
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RonJ
RonJ
3 years ago
Reply to  tractionengine
Speaking of forecasting, Snow coverage in the northern and western U.S. was 444,000 square miles on March 31, double the the average of 242,000 on that date since records were started in 2001. No one forecast that. Famous forecaster Yogi Berra once said it was difficult to make predictions about the future.
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Casual_Observer2020
Casual_Observer2020
3 years ago
Looks like unemployment is rising fastest among those that were making above $200k.
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Zardoz
Zardoz
3 years ago
Reply to  Casual_Observer2020
Things have been bloody in tech… not surprising.
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Casual_Observer2020
Casual_Observer2020
3 years ago
Looks less likely a debt deal gets done by June. This will plunge the economy into recession. Russian subs creep closer to America and China and Russia streghten their relationship.
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Siliconguy
Siliconguy
3 years ago
Reply to  Casual_Observer2020
Russian subs have been twelve miles and one yard from US shores since the ’60s. There is nothing new there.
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Zardoz
Zardoz
3 years ago
Reply to  Siliconguy
Hold on now…. I thought Russia was the good guys?
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8dots
8dots
3 years ago
YouTube Prof Anthony Davies, stop the raiding :
1) Cut gov spending by 10%, not adjust to inflation, for 5 years.
2) Thereafter hold spending constant, don’t even adjust to inflation for 4Y.
3) Thereafter increase spending adj to real GDP.
4) Muni (cities, school districts..) bk is welcome to free former obligations, to prevent new debt.
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Matt3
Matt3
3 years ago
Noticed that the Fed has broken another bank FRC. Looks like this is due to loans as the Fed put in place 100% borrowing on underwater securities.
So now the story will change from miss matched securities to something far worse – loan quality. Who’s next? Will QE be restarted?
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klausmkl
klausmkl
3 years ago
Reply to  Matt3
War is inflationary , QE is inevitable.
The War cycle is just getting started. We will have another Global Conflict. Bad things come in 3’s.
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worleyeoe
worleyeoe
3 years ago
Tomorrow’s & the next several weeks of 1st-time unemployment claims will be interesting. With 245K last week, we could very well be on the verge of REAL labor softening. I have no idea if the GDPNow forecast is accurate or not, but the way Mish writes about it makes it hard to believe it’s anything more than 50/50 and that’s being kind.
What matters are jobs & inflation as we move forward. One more 25-basis point FFR increase may be just enough to seal the deal with a mild recession by late this year.
Who knows? Certainly not JPowell.
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Mish
Mish
3 years ago
Reply to  worleyeoe
The final GDPNow forecast has been very accurate for at least a year (4 quarters).
But we do not know about revisions or GDI
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QTPie
QTPie
3 years ago
Reply to  worleyeoe
The jump to 245K was really based on revisions and since the revision point it has been quite stable at that 245 level (top-bound range) so there’s probably a good chance that it just stays at that level for a while (i.e., in the range of 230-245K).
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QTPie
QTPie
3 years ago
Reply to  QTPie
Just like I thought – 230K – within the 230-245 range.
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