The GDPnow Nowcast for the first quarter took a dive on February 14. Weather-related utility production lessened the blow.
There were three significant reports on February 14: Retail Sales, Industrial Production, and Import-Export Prices.
Import-Export Prices did not seem to matter.
Contributions to GDP
- The report shows PCE goods fell by 0.75 percentage points which I attribute to retail sales.
- The report shows PCE services rose by 0.37 percentage points which I attribute to Industrial Production Utilities.
- Gross Private Domestic Investment fell by 0.22 percentage points which I attribute to other Industrial Production numbers.
- The net of the above is -0.60 percentage points which we see in Real Final Sales but only -0.50 in overall GDP.
The above math is never exact because numbers influence each other.
And on days with multiple reports, assigning percentages can be difficult, but these are clear.
Real Final Sales
The important number is RFS, not the base forecast. The difference is inventory adjustment which nets to zero over time.
It would make much more sense in reporting for the BEA to post RFS and ignore the base number. How about GDP and GDPIA where IA means inventory adjustment?
For the preceding two quarters RFS was higher than base GDP so GDP was better than widely reported. This month, the inventory adjustment is positive so RFS is lower.
1.9 is the current bottom-line estimate for the economy.
The NBER is not going to declare a recession on two quarters of negative GDP if the only reason GDP is negative is IA. Very few people understand this.
Related Posts
February 14, 2025: Retail Sales Crash – Did the Consumer Finally Throw in the Towel?
The Census Department shows huge across-the-board declines in multiple categories, down 0.9 percent overall.
February 15, 2025: Industrial Production Jumps 0.5 Percent But Details Are Ugly
A cold snap boosted utilities by a whopping 7.2 percent.
Retail sales fell 0.9 percent but due to a hot CPI report, real (inflation-adjusted) sales fell 1.3 percent. It’s real retail sales, not nominal, that drive GDP. Please click on the above link for details.
That was the bulk of the decline in GDPNow. Cold weather helped utilities, easing the pain.
DC real estate may be having a problem:
Hal Turner Radio Show – Housing Values in Washington DC COLLAPSE 36.5% in ONE WEEK
Wouldnt be a problem at all but a major improvement for the country if these bubble house prices, that are suffocating the economy, and that the Republicans and Democrats caused through the fed by pushing down mortgage rates by “buying” mortgage backed securities and long bonds with money they printed out of thin air, return to sane levels, so more people will get back to doing real productive work, and quit gambling on houses, and people that do the real work can afford them again and have space for a family.
Unemployment claims jumping in DC
https://x.com/EricLDaugh/status/1890924277530034491
Retail sales fed any by $2.1 trillion spent (annual basis) into existence by Federal govt borrowing? 7.3% GDP deficit spending affect GDP?
I think it is hard to draw strong conclusions about the US economy, but I’m pretty sure it isn’t robustly healthy.
Yes, statistical evidence shows every time the federal government has run a deficit, the economy collapses into a deep recession.
Wait, that’s not right…
Gold Is Worth More in New York
https://archive.ph/5DEdv
Centrifugal forces are growing in CA. Marcus Ruiz Evans leads CalExit. Biden’s
unitary gov transferred CA money to Josh Shapiro, but they hate Trump. Trump in Palisade: people here want to rebuild. We are 100% with u. I have property in Palos Verdes. Palisade majority voted for Kamala. CA secession might save the radical elite 8% in federal taxes. Trump will pour in to reduce Gavin.
DOGE stole 80 million in FEMA funds from the city of New York. No one knows where the money went, my guess into an account in the Caymen Islands. Can’t believe so many people are fine with this.
The reverse, douche. NYC stole Federal FEMA funds to subsidize illegal immigrants.
Go to Mexico.
I never worry about things I can’t control. Musk can do whatever he wants now. Get used to it. There will be a lot more of this.
Some also worry that if hackers gain access to the federal payments system through Musk, they can shut the US down. Who knows? But neither you nor I can do anything about it.
Trump and Musk are in control now.
“Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it’s the only thing that ever has”.
Hi Mike,,,I’ve been doing a little snooping around on the US treasury website and found the USA’s gold holdings on it. I did a spreadsheet calc and the oz’s are now valued at $42.22 USD/oz on Treasury’s books. I would be interested in getting your take on what might happen if they decided to revalue this gold to potentially pay off a portion of US debt, or for other purposes. There has been some talk on Kitco lately on this possibility and its one a lot of gold bugs are interested in. The US will never default on its debt obligations relating to medicare, social security or defense spending. But I’ve been reading the current interest cost is > defense spending. I think their ownly way out is to print money to pay off the countrys debt obligations and stoke inflation by doing so. That in turn will continue to goose gold prices….which are still on the books at $42.22/oz. Revaluation of gold upwards could happen afterwards? Your thoughts????
I am also interested on what this could mean for Canada, as our own bozos have sold off all our gold by 2015 and we currently have 0 oz in the bank backing our plastic money and fake coinage.
If the US started selling some of its gold to pay down a little debt that wouid increase the supply of gold in the market so unless demand went up proportionately, the price if gold wouid go down, if the US sold a significant amount. The $42 is just what the value was when the US last pegged its currency, 91 years ago, and no one including the US govt buys or sells at that price.
The US is not going to sell gold
Agree, I was just trying to show that the poster’s reasoning that if the US sold gold, the price would somehow go up, didnt seem to make sense, as it would increase the amount available for sale. I dont know what was meant by “revalue gold to pay off a portion of debt”.
Note to President Musk
I have been deleting a lot of your comments. Please keep your comments to a minimum or make them more pertinent.
My apologies… I shall endeavor to be less loquacious.
It’s your blog, Mish, and you can delete whoever or whatever you want obviously.
But I’d like to give a thumbs-up to President Musk’s contributions, generally. Some are too much, yes. But a lot of your commenters are economically illiterate and can’t stay on topic because they just want to put out their own political POV BS constantly. So when President Musk calls them out, it usually tones them down awhile and puts their nonsense comments into perspective for the other readers.
Just another opinion, if you want it
THANK YOU MISH!!!!!!!!!
Been following you since 2005-2006 when u did lots of real estate posts. Keep up the good work. DC could be the epicenter with job losses via DOGE. Could be a huge knock off effect starting with housing IMO
Thanks Tucson Man
Job Losses due to Dodge may not have the impact you think.
These people who left will get paid for 8 months and will technically be employed by BLS accounting.
So, how many others will lose jobs? I suspect not enough to matter.
I think for government employees there will be little effect through September, but government contract cancelations could affect employees in the contracting firms and will affect GDP as government spend is a GDP additive. Probably not too much till the second quarter when some of the court filing dust starts to settle.
I believe this is the beginning of the snowball that will hit DC.
This only applies to the federal employees that accept the buyout. There are an estimated 220,000 people that are on probation to be let go without severance.
Since at least 2008 for me.
Mish. Would love to see an analysis of the Nova/DC/MD housing market. I’m hearing listings are exploding. Maybe the recession starts in DC?
Tax CPA here, located in the DMV. I have a large number of W-2 government clients. In 30 years, I have never seen so many scared people. At a minimum they will stop spending or be more hesitant for large purchases. We live in a bubble here. No recession has really hurt us. We suck in money from all over the country in good times and bad and the local economy rarely takes a hit. Maybe this time it will be different and start here.
That does make sense. Probably more so with those who did not take the offer and are scared than those who gladly took 8 months of pay for doing nothing.
But the latter will have concerns until they find a job. Over time, those concerns will mount. Panic in abut 5 months.
I don’t follow that market closely, but it is very likely listings are skyrocketing.
But that means demand elsewhere will rise.
Net nothing.
https://x.com/Mark_R_Mitchell/status/1890569939112587621
I guess maybe we’re going to continue the GOP president=recession thing.
Ten Republican presidents in a row with at least one recession since 1920. 14 recessions in total.
Dems are 4 total recessions since 1920.
Or since 1950: 10 Rep recessions vs 1 Dem recession.
Perhaps Trump can break the string. Still waiting on those tariffs to come into effect and reinvigorate our economy.
The first Republican President sure knew how to get the economy going.
Don’t worry. Trump knows more than all previous presidents combined; Dem or Rep. He is the greatest ever. Just ask him.
He will get our economy moving.
Roosevelt had a recession the middle of the Great Depression. Recessions are a matter of timing. Obama had nothing more than green shoots for years, he didn’t create another Clinton boom era during his 8 years. The 2000-2002 stock crash started under Clinton and lead into a recession in early 2001, before Bush had any effect on the economy.In 2020, it was already over 10 years since the end of the 2008 recession. One was over due.
There’s only so long a person or a country can go on spending like crazy with borrowed money.
Correct. Though I have been hearing that regarding the US my entire life. Perhaps Trump will be the first President to make it come true?
Probably not. He declared bankruptcy a bunch of times and people kept lending him more money.