There are some dramatic changes to the GDPNow model. Let’s discuss.
June 27 Changes
GDPNow base forecast dropped from 3.4 percent to 2.9 percent.
Real Finals Sales jumped from 3.8 percent to 5.1 percent. But all of that was import-export related.
Real Final Private Domestic Sales decreased to 1.4 percent.
The GDPNow Model said the big move happened on June 27 which made no sense to me.
We had fresh import-export data on the 26 as well as huge GDP revisions. On the 27th, the key economic report was personal income and outlays for May, nothing at all to do with imports or exports.
What Really Happened?
I had this Q&A with Pat Higgins, creator of GDPNow.
Mish to Pat Higgins
Hi Pat
By any chance is your spreadsheet missing June 26 data?
I struggle to understand a huge change in inventory investment on June 27 rather than June 26 along with the Durable Goods report and the International Trade report.
Thanks Mish
Higgins Reply
Hi Mish – we didn’t produce or schedule a published forecast on June 26 in spite of the advance manufacturing report on that day because it occurred on the same day as a GDP revision.
Whenever there are days of a GDP revision that is not accompanied by a personal income and outlays release, the monthly PCE data will not be exactly consistent with the quarterly PCE data (since the monthly data won’t include the revision) and a number of the granular GDP subcomponents (all of those published in the “Underlying Detail” tables) won’t be consistent with the higher level GDP subcomponents. Hence today’s update includes the combined impacts of both Thursday’s and Friday’s data releases.
Also, Friday’s release included a large revision to what the model estimated for the Q1 change in private inventories (CIPI):
Hence more of the change in the “Difference” column was due to the revision to the model’s estimate for the Q1 CIPI number than it was for the Q2 CIPI number.
The BEA revised CIPI from $97 billion down to 160 billion for the first quarter.
June 27 Impact on Percentage Point Contributions to GDPNow
Gross Private Domestic Investment went from -0.38 PP to -2.19 PP
Change in Net Exports rose from 2.07 PP to 3.49
This happened despite the fact the trade deficit increased in May by 10.5 percent.
The international trade deficit was $96.6 billion in May, up $9.6 billion from $87.0 billion in April.
Exports of goods for May were $179.2 billion, $9.7 billion less than April exports.
Imports of goods for May were $275.8 billion, $0.1 billion less than April imports.
I have slightly different numbers because I subtract advance numbers from previous full data numbers rather than from precious advance numbers.
Doing so, I have imports down 2.082 billion and exports down 11.225 billion.
As a result of all these distortions, the real final sales nowcast sits at 5.1 percent but real final domestic sales at 1.5 percent and real final private domestic sales ate 1.4 percent.
Fed Chair Jerome Powell puts the most weight on private domestic sales so I have added that to my charts going forward.
Regardless, I don’t believe exports are leading the charge here. This is messed up data.
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Of course it is, the only question is how long does it take for the data to find its new balance that’s trustworthy, in that we see clear indications of little, modest or a lot of inflation being produced by the tariffs?
I would suspect that the data will be reliable by September. The 2nd most important question is what does TACO do between now & then in terms of tariff rates that could derail this much needed outcome.
I agree 100% that he’s been all over the place with regards to tariffs, and it’s bad for the economy. If he was fully committed to tariffs back in April, he should have started out with 10% across the board and then targeted the 10 or so most important nations with additional tariffs that increased by x% of x interval.
It should have been simple & straightforward to held predict the macro effects. But that’s not Trump. He thinks uncertainty & guessing on the part of our trading partners creates an advantage for us. Maybe it does to a certain degree, but it also has a very big downside for businesses trying to plan out their FY.
Last edited 1 year ago by BenW
I’m back robbyrob
1 year ago
Analyst sends alarming message after S&P 500 hits all-time highHere’s what could happen to the S&P 500 next.
3M SPX: Apr 2025 close (not over) is higher than Jan 2025 high. It’s a #9. If not, in order to plunge there must be a 3M close below Apr low. Breaching Apr low isn’t bad enough. There are 3 highs above, shortening the spread between them. If July 2025 closes below July 2024 close SPX slump might cont. Might !.
There is estimated to be $25T trillion invested in 401K, 403B and IRAs. Most of this money is invested in stocks. Unless people need to take the money out of their invest accounts the stock market can’t drop much. I really know nothing about the stock market and high finance just my common sense guess.
Michael Engel
1 year ago
1D SPX: a small doji on high vol, on a Fri, when traders clear positions, to a new all time high. 1W SPX: RSI: up from 27 to 61, a head bump. 6/23 a higher close than 2/10 close, on lower RSI. A large green bar, twice as large as the previous two, on slightly higher vol. Something is wrong. A weekly #9.
1M SPX: the first close (not yet) above Dec 2025 high. Options:
1) The trend is up. Between Feb and June SPX. within four months. SPX rd trip gobbled 2,700 pts, a new annual record. SPX on sugar high.
2) July an upthrust, a red bar. SPX needs to refill its gas tank, before moving up.
3) An #8. After retracing 67% of the move from Oct 2023 low to to Feb high the trend is weak. It might slump. 1M SPX RSI escaped recession territory since Feb 2009, for fifteen years, since the zero rates.
1M divergence : Nov 2024 RSI is higher than June 2025 RSI, but June 2025 close
is higher. To be confirmed. We have weekly and monthly divergences. Can SPX still move higher: yes.
Last edited 1 year ago by Michael Engel
Michael Engel
1 year ago
In Apr, May and June GDPNow was strong. In July, Aug and Sept the Fed will cut rates twice and stay the course. JP told us ahead of time that the frontend is going down. He protects Q4.
Ann
1 year ago
Here’s some good news and some bad news. We had better hope that the tariffs have one of their intended consequences, the weakening of China, which could lead to the uprising of the population to overthrow the communist regime.
Excerpt: Communist China is grappling with the most severe economic crisis in its history, a downturn that the regime will not recover from, according to Kyle Bass, founder and chief investment officer of Hayman Capital Management.
“There is nothing that is going to bail China out of their economic spiral. They’re having a real estate crisis, a banking crisis, a youth unemployment crisis, and now they need to be worried about their current account,” Bass said in an interview on EpochTV’s “American Thought Leaders” that aired on June 26.
Bass said U.S. tariffs and declining trade threaten China’s economic advantage, which is its trade surplus with the United States. China’s exports to the United States plunged by 35 percent in May compared to a year earlier, according to Chinese customs data.
Excerpt: One key trend to have emerged over the course of the Russia-Ukraine war is that China, Iran, and Russia are increasingly and very openly cooperating militarily and technologically, including Moscow sharing experience gained in the course of its Ukraine ground operations.
Newsweek reports that “Russia plans to train hundreds of Chinese military personnel this year on lessons learned from its ongoing invasion of Ukraine,” based on regional sources. Some of what has been ‘learned’ is how to defend against US-made and NATO-supplied weaponry – something which Beijing is surely interested in amid the long-running Taiwan standoff with Washington.
“Instructors will cover methods for countering weapons systems used by Ukrainian forces that were produced by the United States and its NATO allies, a source in Ukraine’s top intelligence agency told the outlet,” the Newsweek report continues.
Specifically ‘lessons for a Taiwan conflict’ would be gleaned: This training would further strengthen security ties between Russia and its “no limits” ally China, which in recent years has stepped up joint military exercises. Battlefield insights into U.S. weaponry could offer an advantage as China seeks to surpass the U.S. as the leading military power in the Indo-Pacific.
The idea that the Chinese will overthrow their government is delusional. Same with the idea of Putin being overthrown. Their governments actually have much higher public approval ratings than western countries and have more social cohesion than the west.
I was shocked by a recent video featuring a review of a Chinese tool company. It looks like the Chinese have come a long way EVERYWHERE in their society and at least this factory. Of course it could all be BS.
“…..overthrow the communist regime….”
Old Cold War pipe dream.
MPO45v2
1 year ago
The data moving forward is going to be garbage. Let’s review why:
1. Trump/Doge admin has laid off tons of government workers. And while many won’t officially leave until September, if I were them I’d take the summer off and “phone it in” so everything is questionable starting the summer holiday season.
2. Whoever is left behind to gather and report data will be Trump lackeys that will “massage” the numbers to look good. Quite frankly, I’m not sure MAGA cult appointees will even know how to gather and report data correctly.
3. Even if by some miracle the numbers are/were accurate, there is no way to avoid the volatility due to Trump’s hissy fits. Just recently he broke off trade talks with Canada. Next week it may be the EU, China or whoever triggers the sleepy demented Don. The numbers are going to be volatile no matter what.
The best thing to do now is to place close attention to quarterly reporting for big firms like Amazon, Walmart, Costco, Procter & Gamble, etc. THey are a far better gauge of consumer sentiment and inflation impacting the bottom line. Of course, these firms “tweak” the numbers as well but that’s going to be the best we have moving forward.
Those still at their desks may be purposely submitting false numbers until Sept.
They will report the numbers coming from the WH.
Trump is mentally ill and cannot be trusted like a rational human.
With help of God, a patriot or the 2026 election Taco may disappear sooner, after that there is just MAGA to contend with.
86/47
Frosty
1 year ago
Great series of explanations Mish.
My gut reaction is that the GDP revisions and the miscellaneous data points support Powells position to hold interest rates where they are.
Trump, of course, wants interest rates to fall and cheap money to rain down upon the land. Helicopter money… This to blow yet another massive inflationary bubble in everything so he can ride that balloon of hot air. Hot air seems to be his specialty.
The cheap money may also help with the massive and bloated deficits of trumps Big Beautiful Bill. I would call it the Broken, Bullshit Bill, Bloated, Balloon Bill or alternatively, the Bubble Blowing Bill.
Small cracks are starting to show in the real estate market. There are rumors that there is some liquidation at the commercial single family home rental market but I have not seen credible evidence of that – yet.
While prices are falling in select markets like Florida, Texas and California, my real estate market is price stable but few buyers are willing to pay premium prices and higher interest rates. Inventory is rising but not precipitously.
In 2015, China imported 13% of its pork. Due to the trump tariffs China invested heavily in domestic pork production. In 2024 China imported only 7% of its pork supply. invested heavily in its pork industry and now is nearly self sufficient!
From: ukragroconsult.com
According to trade data from the US Census Bureau, 55% of US pig offal exports in 2024 went to China. Cumulatively, over January to May 2025, the US accounted for 25% of China’s pig offal imports”.
This represents a >50% reduction in U.S. farmers exports to China.
Not that it matters but Obama had 0% for his entire term save for 1 month; Biden had it between 1 and 2 years. Don’t make it seem like only Trump wants low rates. Surely you were ranting for 10 of the last 14 years about how low rates fueled the deficit spending under the Democrat regime, right?
America has been deficit spending my entire adult life and low rates enable all sorts of malfeasance.
Not sure how every post, including those like these that mentioned his name ZERO times has to be about him.
My take on the blog post is that increasingly the actual economic data, whether positive or negative, has no direct impact to markets which have been untethered from data for a long long time. i.e. when GDP was near zero/negative markets were at all time highs, revisited Friday. Everything is priced in and yet nothing is actually priced in, especially potential bad news. The markets discounting structure is broken because moral hazard is always present via same-said deficit spending.
I see no real improvement in prices with some fairly stable and others continuing higher at a crazy pace. Boy do we need an economic downturn without backstops to clear things but they’ll never let it happen (mentioned by Mish in an earlier post today).
No Obama doesn’t matter. Not sure what Obama, who left office in Jan 2017 (8 years ago – almost a decade) has anything to do with the current situation so why bring it up unless you have TDS II.
Biden is also irrelevant. Voters voted for Trump on the premise that he would solve all the worlds ills on day one. We’re all waiting.
You are correct that Obama had low interest rates. They were spurred on by the collapse of the Bush housing bubble and massive liquidity injections to fund the Iraq war and military spending on behalf of the oil industry.
During Biden’s term, he had Zero percent interest rates for two years. IMO it was at least a year too long. However, all of liquidity injected during Biden’s first two years was absorbed by the Fed in the second two years. I was actually surprised that the economy did not falter under Biden. The Fed managed the withdrawal of liquidity and interest rates extremely well once they finally started to tighten. Again too late…
The inflated money supply we are working off now is what was injected during the Trump first term if you look at it from the last in first out perspective.
I do not see any improvement in prices either with the exception of eggs and chicken. Regular gasoline was $2.96 the day Trump was elected in my market and today is $3.39. My market is affected by the Canadian tariffs. Other parts of the country are not affected.
So we have different perspectives, that’s normal and not a problem to me.
Great post, Frosty. I hope this gives Trump sufficient justification to nationalize Smithfield Foods, the largest pork producer in the USA & Chinese owned. With higher US supply, I’m looking forward to prices falling.
Of course it is, the only question is how long does it take for the data to find its new balance that’s trustworthy, in that we see clear indications of little, modest or a lot of inflation being produced by the tariffs?
I would suspect that the data will be reliable by September. The 2nd most important question is what does TACO do between now & then in terms of tariff rates that could derail this much needed outcome.
I agree 100% that he’s been all over the place with regards to tariffs, and it’s bad for the economy. If he was fully committed to tariffs back in April, he should have started out with 10% across the board and then targeted the 10 or so most important nations with additional tariffs that increased by x% of x interval.
It should have been simple & straightforward to held predict the macro effects. But that’s not Trump. He thinks uncertainty & guessing on the part of our trading partners creates an advantage for us. Maybe it does to a certain degree, but it also has a very big downside for businesses trying to plan out their FY.
Analyst sends alarming message after S&P 500 hits all-time highHere’s what could happen to the S&P 500 next.
https://www.thestreet.com/investing/stocks/s-p-500-hits-all-time-high-now-what
3M SPX: Apr 2025 close (not over) is higher than Jan 2025 high. It’s a #9. If not, in order to plunge there must be a 3M close below Apr low. Breaching Apr low isn’t bad enough. There are 3 highs above, shortening the spread between them. If July 2025 closes below July 2024 close SPX slump might cont. Might !.
There is estimated to be $25T trillion invested in 401K, 403B and IRAs. Most of this money is invested in stocks. Unless people need to take the money out of their invest accounts the stock market can’t drop much. I really know nothing about the stock market and high finance just my common sense guess.
1D SPX: a small doji on high vol, on a Fri, when traders clear positions, to a new all time high. 1W SPX: RSI: up from 27 to 61, a head bump. 6/23 a higher close than 2/10 close, on lower RSI. A large green bar, twice as large as the previous two, on slightly higher vol. Something is wrong. A weekly #9.
1M SPX: the first close (not yet) above Dec 2025 high. Options:
1) The trend is up. Between Feb and June SPX. within four months. SPX rd trip gobbled 2,700 pts, a new annual record. SPX on sugar high.
2) July an upthrust, a red bar. SPX needs to refill its gas tank, before moving up.
3) An #8. After retracing 67% of the move from Oct 2023 low to to Feb high the trend is weak. It might slump. 1M SPX RSI escaped recession territory since Feb 2009, for fifteen years, since the zero rates.
1M divergence : Nov 2024 RSI is higher than June 2025 RSI, but June 2025 close
is higher. To be confirmed. We have weekly and monthly divergences. Can SPX still move higher: yes.
In Apr, May and June GDPNow was strong. In July, Aug and Sept the Fed will cut rates twice and stay the course. JP told us ahead of time that the frontend is going down. He protects Q4.
Here’s some good news and some bad news. We had better hope that the tariffs have one of their intended consequences, the weakening of China, which could lead to the uprising of the population to overthrow the communist regime.
————————————-
The good news:
https://www.zerohedge.com/geopolitical/chinas-economy-spirals-no-end-sight-says-kyle-bass
Excerpt: Communist China is grappling with the most severe economic crisis in its history, a downturn that the regime will not recover from, according to Kyle Bass, founder and chief investment officer of Hayman Capital Management.
“There is nothing that is going to bail China out of their economic spiral. They’re having a real estate crisis, a banking crisis, a youth unemployment crisis, and now they need to be worried about their current account,” Bass said in an interview on EpochTV’s “American Thought Leaders” that aired on June 26.
Bass said U.S. tariffs and declining trade threaten China’s economic advantage, which is its trade surplus with the United States. China’s exports to the United States plunged by 35 percent in May compared to a year earlier, according to Chinese customs data.
————————————-
The bad news:
https://www.zerohedge.com/geopolitical/russian-military-instructs-china-how-beat-us-nato-weapons
Excerpt: One key trend to have emerged over the course of the Russia-Ukraine war is that China, Iran, and Russia are increasingly and very openly cooperating militarily and technologically, including Moscow sharing experience gained in the course of its Ukraine ground operations.
Newsweek reports that “Russia plans to train hundreds of Chinese military personnel this year on lessons learned from its ongoing invasion of Ukraine,” based on regional sources. Some of what has been ‘learned’ is how to defend against US-made and NATO-supplied weaponry – something which Beijing is surely interested in amid the long-running Taiwan standoff with Washington.
“Instructors will cover methods for countering weapons systems used by Ukrainian forces that were produced by the United States and its NATO allies, a source in Ukraine’s top intelligence agency told the outlet,” the Newsweek report continues.
Specifically ‘lessons for a Taiwan conflict’ would be gleaned: This training would further strengthen security ties between Russia and its “no limits” ally China, which in recent years has stepped up joint military exercises. Battlefield insights into U.S. weaponry could offer an advantage as China seeks to surpass the U.S. as the leading military power in the Indo-Pacific.
The idea that the Chinese will overthrow their government is delusional. Same with the idea of Putin being overthrown. Their governments actually have much higher public approval ratings than western countries and have more social cohesion than the west.
I was shocked by a recent video featuring a review of a Chinese tool company. It looks like the Chinese have come a long way EVERYWHERE in their society and at least this factory. Of course it could all be BS.
https://www.youtube.com/watch?v=t2TfbN3v8h8&t=40s
86/47
“…..overthrow the communist regime….”
Old Cold War pipe dream.
The data moving forward is going to be garbage. Let’s review why:
1. Trump/Doge admin has laid off tons of government workers. And while many won’t officially leave until September, if I were them I’d take the summer off and “phone it in” so everything is questionable starting the summer holiday season.
2. Whoever is left behind to gather and report data will be Trump lackeys that will “massage” the numbers to look good. Quite frankly, I’m not sure MAGA cult appointees will even know how to gather and report data correctly.
3. Even if by some miracle the numbers are/were accurate, there is no way to avoid the volatility due to Trump’s hissy fits. Just recently he broke off trade talks with Canada. Next week it may be the EU, China or whoever triggers the sleepy demented Don. The numbers are going to be volatile no matter what.
The best thing to do now is to place close attention to quarterly reporting for big firms like Amazon, Walmart, Costco, Procter & Gamble, etc. THey are a far better gauge of consumer sentiment and inflation impacting the bottom line. Of course, these firms “tweak” the numbers as well but that’s going to be the best we have moving forward.
1302 days left before the big TACO goes stale.
With help of God, a patriot or the 2026 election Taco may disappear sooner, after that there is just MAGA to contend with.
86/47
Great series of explanations Mish.
My gut reaction is that the GDP revisions and the miscellaneous data points support Powells position to hold interest rates where they are.
Trump, of course, wants interest rates to fall and cheap money to rain down upon the land. Helicopter money… This to blow yet another massive inflationary bubble in everything so he can ride that balloon of hot air. Hot air seems to be his specialty.
The cheap money may also help with the massive and bloated deficits of trumps Big Beautiful Bill. I would call it the Broken, Bullshit Bill, Bloated, Balloon Bill or alternatively, the Bubble Blowing Bill.
Small cracks are starting to show in the real estate market. There are rumors that there is some liquidation at the commercial single family home rental market but I have not seen credible evidence of that – yet.
While prices are falling in select markets like Florida, Texas and California, my real estate market is price stable but few buyers are willing to pay premium prices and higher interest rates. Inventory is rising but not precipitously.
In 2015, China imported 13% of its pork. Due to the trump tariffs China invested heavily in domestic pork production. In 2024 China imported only 7% of its pork supply. invested heavily in its pork industry and now is nearly self sufficient!
From: ukragroconsult.com
According to trade data from the US Census Bureau, 55% of US pig offal exports in 2024 went to China. Cumulatively, over January to May 2025, the US accounted for 25% of China’s pig offal imports”.
This represents a >50% reduction in U.S. farmers exports to China.
Winning Bigly of course…
>
Not that it matters but Obama had 0% for his entire term save for 1 month; Biden had it between 1 and 2 years. Don’t make it seem like only Trump wants low rates. Surely you were ranting for 10 of the last 14 years about how low rates fueled the deficit spending under the Democrat regime, right?
America has been deficit spending my entire adult life and low rates enable all sorts of malfeasance.
Not sure how every post, including those like these that mentioned his name ZERO times has to be about him.
My take on the blog post is that increasingly the actual economic data, whether positive or negative, has no direct impact to markets which have been untethered from data for a long long time. i.e. when GDP was near zero/negative markets were at all time highs, revisited Friday. Everything is priced in and yet nothing is actually priced in, especially potential bad news. The markets discounting structure is broken because moral hazard is always present via same-said deficit spending.
I see no real improvement in prices with some fairly stable and others continuing higher at a crazy pace. Boy do we need an economic downturn without backstops to clear things but they’ll never let it happen (mentioned by Mish in an earlier post today).
No Obama doesn’t matter. Not sure what Obama, who left office in Jan 2017 (8 years ago – almost a decade) has anything to do with the current situation so why bring it up unless you have TDS II.
Biden is also irrelevant. Voters voted for Trump on the premise that he would solve all the worlds ills on day one. We’re all waiting.
Lingering Obama Trauma
OMG a brown man in a tan suit, the world is ending. /s
Bill,
You are correct that Obama had low interest rates. They were spurred on by the collapse of the Bush housing bubble and massive liquidity injections to fund the Iraq war and military spending on behalf of the oil industry.
During Biden’s term, he had Zero percent interest rates for two years. IMO it was at least a year too long. However, all of liquidity injected during Biden’s first two years was absorbed by the Fed in the second two years. I was actually surprised that the economy did not falter under Biden. The Fed managed the withdrawal of liquidity and interest rates extremely well once they finally started to tighten. Again too late…
The inflated money supply we are working off now is what was injected during the Trump first term if you look at it from the last in first out perspective.
I do not see any improvement in prices either with the exception of eggs and chicken. Regular gasoline was $2.96 the day Trump was elected in my market and today is $3.39. My market is affected by the Canadian tariffs. Other parts of the country are not affected.
So we have different perspectives, that’s normal and not a problem to me.
>
Bill Clinton policies and legislation are what caused the housing bubble of 2006.
Those other people are gone.
Great post, Frosty. I hope this gives Trump sufficient justification to nationalize Smithfield Foods, the largest pork producer in the USA & Chinese owned. With higher US supply, I’m looking forward to prices falling.
Fascist pork is the most delicious.
Simple solution stopping eating pork.
“This is messed up data.“ Perfect analysis for a messed up world.
King Chaos or Stable Genius…
What’s your reality?
Try this:
“Reality is an escape for people who can not handle: drugs, sex or religion.”
>
These people don’t know anything. They are guessing. My guess is 3.1, See closer.