Caution the posted GDPNow numbers are incorrect. My chart is correct.
Officially the current GDPNow nowcast is -2.1 percent with Real Final Sales (RFS) at -2.7 percent.
However, GDPNow creator Pat Higgins has confirmed the posted numbers are too low by two full percentage points. He does not like to change the model mid-cycle.
My chart shows his stated, but not shown adjustments.
I covered this on March 7 in Statement from Pat Higgins on Gold Impact to GDPNow Forecast
Although GDPNow does [not] distinguish gold from other imports, the Bureau of Economic Analysis does, in tallying up the total of the net exports, subaggregate within GDP. Removing gold from imports and exports leads to an increase in both GDPNow’s topline growth forecast and the contribution of net exports to that forecast, of about 2 percentage points. The topline growth forecasts also increased today—standard model -2.4 percent to -1.6 percent, “gold adjusted” model -0.4 percent to 0.4 percent—as data from today’s labor market report came in stronger than the model was expecting based on the limited February data the model received prior to that release.
The above snip was from a Linked-In post by Higgins. I added the word [not] which is now corrected in Linked-In.
I commented …
Employment Added to GDPNow
Higgins said “ today’s labor market report came in stronger than the model was expecting based on the limited February data the model received prior to that release.“
As I have commented, it’s not the data that matters (the report was bad), it’s the data vs what the model expected (not what economists expected).
Today, the jobs consensus was 160,000 vs an actual of 151,000 with significant negative revisions too.
But for whatever reason (I strongly suspect wage growth), the model liked today’s report, boosting PCE spending estimates by 0.42 percentage points.
Higgins doesn’t show Real Final Sales reflective of today’s unemployment report but I will take a stab at (+0.8 for Employment – (0.57 – 0.43) for CIPI), a net of +0.64 to (-2.8 + 2.0) = -0.16 percent.
We will find out on Monday [March 17].
CIPI stands for Change in Private Inventories.
The red box now shows my calculation was correct. To a single decimal point, RFS was adjusted to -0.2 percent for March 7.
Real Final Sales
RFS is the bottom-line GDP number. The difference between GDP and RFS is CIPI which nets to zero over time. Since CIPI went up on March 7, I calculated RFS would not increase as much as the base forecast.
In the red box note that GDP went from -0.4 to +0.4 (0.8 percentage points) but RFS went from -0.8 to -0.2 (0.6 percentage points).
Retail Sales
Retail sales clobbered GDPNow and RFS by 0.5 percentage points each.
The current nowcast is -0.1 percent on the base forecast and -0.7 percent for RFS.
For those unaware, I was adjusting GDPNow before Higgins’ Link-In post.
For discussion, please see How Did Gold Imports Exacerbate the Huge Decline in GDPNow Nowcast?
The GDP estimate of GDPNow crashed on February 28. Gold played a big Impact.
My original correction was to subtract out all of the trade report, knowing that was overdoing things.
I have since confirmed with Higgins, by email, that the correct adjustment is two full percentage points for both GDP and RFS.
Message to the BEA
It would behoove the BEA and writers to make a note of top-line vs bottom-line estimates of GDP.
The NBER, the official arbiter of recessions, only considers the bottom-line estimate. This is one reason why two quarters of negative GDP are woefully insufficient to call a recession.
The last time GDP went negative for two consecutive quarters (now revised away), I said “no recession” on the basis of RFS. I tend to be early on recession calls, but I ducked that one.
My last recession call was for May-June of 2024. That hasn’t hit, so I am early again, but not as early as some who called recession as early as October 2023.
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March 7, 2025: A Historical Look at Unemployment Rates Heading Into Recessions
In 1994, the BLS made huge changes in the calculation of the unemployment rate. So that’s all the further back I look.
March 10, 2025: Trump and Secretary of Treasury Bessent Discuss the “Detox Recession”
Don’t worry, it’s just a little more pain and inflation disturbance before tariff greatness begins.
March 17, 2025: Retail Sales Barely Rise in February, They’re Negative Factoring in Revisions
Retail sales had another poor month in February. It’s very recession looking.
Also factor in tariffs, trade disruptions, DOGE firings, an abrupt halt to immigration and immigration-related spending, and massive business uncertainty about everything Trump does.
Where are we?
So according to the ATL FED, GDP dropped 5 percentage points within a span of two weeks and has gained it all back within two weeks.
Once again, a waste of electronic ink. It would be a waste of my time if I hadn’t learned by now to ignore anything about GDPNow. I admit wasting minute, reading to where Higgins “doesn’t like to change the model in mid cycle” to, once again, realizing the uselessness of his “model”. The only reason I got that far was because I have great respect for Mish. I don’t always agree with him but he doesn’t usually keep repeating garbage. Lesson finally learned.
When egg prices go up 1% consumption decline by 0.85%.The most inelastic food are: junk food, soft drinks and cereals. Behavior econ described the irrational buyer. They will pay any price. They need a fix. The food industry know about it. They addict us. They make us irrational. If American consume less snacks, junk food and soft drinks: we became more rational.
this is absolutely correct. of course ppl get addicted to these foods which horrible effects on physical health, mental acuity, and emotional stability. Also notable that its the poorest people with high stress jobs that emotionally abuse these narco-foods. unfortunately there are no good solutions that don’t involve some kind of government policy change (for example stop subsidizing corn the main processed food imput)
watch on utube Dr Robert Lustig with Andrew Huberman and Ford Brewer. Gems.
Sales of motor vehicles plunge in Jan. They improved in Feb from very negative to slightly negative. American are eating less snacks and junk food. Snacks and bread contain emulsifies. Emulsifiers are laundry detergent. They burn our internal organs and cause obesity. Lower gas prices, lower restaurants and snacks sales reduced retail sales. Sales at restaurants and bars made a rd trip to 2023 high. Is slowing down good or bad ???
The annual motor vehicle sales are 16 millions. If we are in recession they should be 10/13 millions units per year. Under Trump, with new plants and the satellites around them, and with twenty millions new immigrants, they might grow bc we transferred highly skilled jobs to Canada and Mexico, sharing the loot with them. Motor vehicle sales might be in re-accumulation for two years since 2023. After the jump they are backing up.
what new plants are you refering too?
we need a slow down
Everyone is entitled to an opinion.
But please no take-backs later if your particular job is ‘slowed down’, your Social Security check is cut or the budget deficit increases when others want their legislatively mandated unemployment checks
haven’t had a job since i was in my 20s. i eat what i kill. not concerned about SS etc………….i’ve lived through a great depression and a nation busting up already. it can be scary, thrilling and profitable if one is lucky.
In case the process for funding of deficit spending is too complicated here is a child’s version.
https://www.zerohedge.com/political/musk-feds-have-magic-money-computers-issue-payments-out-thin-air
I doubt any numbers Musk comes up with.
But you trust the government’s numbers? Also, Musk was talking about lack of accountability in disbursement of funds from different government offices around the country. Don’t go all MDS on us.
Musk is a drug fueled nepo baby with delusions of grandeur.
Musk does nothing but lie. what was the last time a Tesla or space x product came out on time and did what it was initially claimed to do?
Look up. The stranded astronauts are back today. He bet a bunch of his money on Trump. I will agree though, he seems to be off his game lately.
Especially here. Not a lot of printed dollar bill cash being generated by computers. I’m waiting on pins and needles to see the ‘evidence’ all these specific government agencies are creating credits for beneficiaries without debits anywhere to be found elsewhere
The rate-of-change in monetary flows, the volume and transaction’s velocity of our means-of-payment money, the proxy for the real output of goods and services, is decelerating, but is not yet in negative territory.
Stocks rallied off the 2nd seasonal inflection point.
If I recall, a recession is two quarters of negative GDP so Q1 is just about done. Assuming Q2 and Q3 are negative or Q3 and Q4 are negative, then we have a good idea of when the Trump self-induced recession began.
Next question is when will it finish? I can’t wait for the next Fed meeting.
Calm down mpox. Q1 won’t even be negative. Markets loved the number today.
You recall incorrectly. A recession is whatever the NBER says it is. “Two quarters of negative GDP” is merely a Wall-Street approximation.
Per the NBER itself, “The NBER’s definition emphasizes that a recession involves a significant decline in economic activity that is spread across the economy and lasts more than a few months.”
So are we in a recession then or not, or will be soon?
Can you tell us from the BLS household survey total employment numbers, which have “always” predicted recessions for the last 80 years?
You’ll have to wait a few more quarters … or years… for the NBER to tell you that the recession that they finally noticed is already over. Just like in 2008-2009 and 2020
I would trust NBER’s analysis before I would of any wall street or investor prediction who would benefit as a result of deflated numbers. The reality is that inflation is remains at least 3% and will go higher if the tariffs become fully in effect. I would argue inflation and its eventual impact on interest rates are the most important economic numbers with the addition for correctly calculating real final sales. In fact, GDP is of less importance in the long-run. Of course, today’s casino, trader driven markets are impact the news of the day that are likey to be revised.
Trouble with NBER is the lag. Their calls are useful historically but not in real time.
A new administration and new policies will take some time. Transition period for you sniveling baby boomers. Snivel as much as you want, no one cares. We actually get great joy from your sniveling.
what a mean-spirited and pointless comment.
“Where are we?”
According to Trump, we are entering the Golden Age! His tariffs will bring in so much money and create so many jobs, that we will all soon tire of so much winning!
I hope that he adds a lot of tariffs over the next month, and we will be able to sit back and watch the tariff revenue roll in over the next 4 years, which will make us all rich!
Of course, the results will start to come in soon. Based on what I have seen so far, the results may not be exactly what Trump is expecting.
I am reading stories about how Canadians, Danes, and Europeans in general are beginning to boycott all things American. They are cancelling travel to the US. They are promoting “shop local”.
Meanwhile, Trump’s tariffs on important raw material imports such as oil, natgas, electricity, lumber, potash, steel and aluminum will raise costs for domestic manufacturers, and make them less competitive. I expect a manufacturing slowdown.
Tariffs in the auto sector, in particular, will likely result in a slowdown in that sector. I expect layoffs in the auto sector within a few months.
Cancelling funds from the IRA will put a stop to many projects that are already underway. This will result in more layoffs.
DOGE is resulting in a lot of people losing their jobs and a lot of uncertainty. So consumers will be cutting back.
Mish has been calling for a recession for some time now. I am now in agreement with him. I expect a recession to begin this year. Which will allow Republicans to keep their recession streak going. Every Republican administration since 1920 has had a recession begin during their watch. Impressive!
I am predicting we see protests in all 50 state capitals if the economy keeps going south. Trump is not going to change this time. He has asked for plans to take over Panama from his military planners. Trump has true delusions of grandeur this time and he shows no signs of changing course.
Don’t know about protests. Seems like a waste of time.
My concern is that Trump is setting the stage for a four year anti-American backlash with all our trading partners. Which will make it difficult for any American company that hopes to export while Trump is president. And during those four years, our trading partners will establish solid new relationships which will make it difficult for American firms to get back in the game in the future.
four years? you are a great optimist.
I disagree. Canada and Mexico have taken advantage of our lax enforcement of trade and NATO agreements. They should not have big trade surpluses with United States. Canada rides on our coattails, spending less than 2% of GDP on defense, like Europe in leaving the heavy lifting to us. I really hope that Canada forms an alliance with China while Trump is in office. Then, you’ll see Canada become just a vassal territory of the United States. Mexico, among many violations, has been complicit with the Chinese in the shipping of fentanyl into the US. Also complicit with the Chinese in the shipment of Chinese goods into the United States in such a way as tariffs are avoided. Stop clutching your pearls.
You can disagree all you want. But it won’t change the facts.
We import a lot of reasonably priced raw materials from Canada. Oil, natgas, electricity, potash, aluminum, lumber, etc. They are doing us a big favor. Because we can’t produce enough of these raw materials ourselves.
Our manufacturers wisely take these raw materials and process them into higher priced goods that we sell back to Canada.
It’s a win-win for us.
Take oil. We import 4 mbpd from Canada at prices that are $12-$20 cheaper than our own WTI. We refine it and then sell some of the refined products back to Canada making a nice profit.
We actually can’t function without this oil. And if we stopped importing this oil, we would be running a big trade surplus with Canada, rather than a small trade deficit.
The same thing happens with aluminum and potash. We are actually taking advantage of Canada rather than the other way around.
Now, Trump is messing this up by putting tariffs on things we absolutely need, and raising the cost of these products for American companies. It’s really dumb.
And to top it all off, Trump is pissing off Canadians with all his insults, and they are now refusing to buy US products and refusing to travel to the US.
I fully support peaceful protesting, but I think any protestors solely against Trump policies would be uninformed or ignorant. I think our economic problems are the fault of both the Democrats and Republicans and the huge weight of debt and malinvestment they have put on the country. I think the protestors would be getting it wrong if they were not telling congress to stop deficit spending.
It’s worse than just boycotts. One the one hand, people are boycotting and on the other hand, Trump is doing everything possible to keep Canadians out. Florida is going to take a YUGE hit.
https://www.ctvnews.ca/canada/article/us-hardens-rules-for-visiting-canadians/
I imagine that “some snowbirds” will give up their Florida winters. But many of them own their places in Florida and are unlikely to abandon them.
However, I suspect that future snowbirds are likely to consider other winter locations that are not in the US.
I know that many US border towns are already suffering as Canadians refuse to cross the border to shop.
Both American and Canadian airlines are cancelling many routes from Canada to the US as traffic has already plummeted .
And this is just starting. In a few months time we are going to see a big impact from this wave of anti-American feelings.
This might be the first time that the stupidity of a single human being has put an economy into recession within two months. I reckon Trump believes that this will earn him a Nobel prize in economics.
Not quite – whoever let COVID out of the WIV has already met your standard.
That one took way more than two months. Doesn’t inhibit Trump’s chances for a Nobel economics prize (in his mind).
Q1 wont be negative. I will see to that with my spending.
So, where will the 10 year be a year from now?
How stupid will Trump be – In what ways?
About 3.50
29 years since Greenspan’s “Irrational Exuberance” speech – then The Fed REALLY went into high-gear printing and other tricks, prestidigitation and sleight-of-hand.
And NOW the stock market crybabies squeal like stuck pigs.
“Trump…Musk…Trump…Musk…”
Ad Infinito.
Ad Nauseam.