The BEA reports GDP rose 2.3 percent vs a consensus 2.6 percent. But details are mixed.
Today the Advance Estimate of GDP from the BEA for the fourth quarter of 2024 is 2.3 percent at an annualized quarterly rate.
The increase in real GDP in the fourth quarter primarily reflected increases in consumer spending and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased.
A Word About Imports
Despite the BEA’s statement, imports have no impact on GDP.
The BEA subtracts imports because it erroneously add imports to GDP when it shouldn’t.
For example, you buy something from Amazon produced in China, that erroneously adds to GDP. To correct the error, the BEA subtract imports.
Real GDP, Real Final Sales, Real GDI Billions 2024-Q4
GDP vs GDI
GDP and GDI are two measures of the same thing. The measure of product sold should match the measure of income and wages produced.
The Philadelphia Fed and others have concluded that GDI is a more accurate measure and I agree.
But GDI lags GDP by one month in Q1, Q2,and Q3. GDI lags by two months in Q4. We will not see GDI until the third estimate for Q4.
Gap Between Real GDP and Real GDI
The gap between GDP and GDI has been positive for 7 consecutive quarters. This makes sense because job revisions have been negative for years.
If job growth is overstated, it’s easy to believe income is overstated as well. But we will not have GDI for the fourth quarter for another two months.
Instant Gratification
Because the market always wants instant gratification, we look at GDP instead of GDI.
The same applies to BLS monthly jobs reports are grossly distorted estimates vs QCEW data that encompasses a 95% of the data.
The monthly jobs reports are so bad, the BLS would do everyone a service if it stopped producing them. The same applies with GDP and GDI.
GDP Stronger Than It Looks
For those who believe GDP is the better measure, Real Final Sales is the number to watch.
The difference between GDP and Real Final Sales is inventory adjustment that nets to zero over time.
Annualized GDP was 2.3 percent but annualized Real Final Sales was a much stronger 3.2 percent.
Also, the consensus estimate for Personal Consumption Expenditures was 3.1 percent in a range of 2.9 percent to 3.7 percent.
But the BEA reports a very strong 4.2 percent blowing away even the top estimate.
Something is amiss somewhere with these spending-income discrepancies.
On the Negative Side
Closer scrutiny shows it was not all rosy.
Investment took a full percentage point off contributions to GDP.
Consumer spending is all that kept the economy humming. Is that going to last?
Those are the good, bad, and ugly details.
Jobs Overstatement
On November 20, I commented Quarterly QCEW Data Provides More Evidence of BLS Jobs Overstatement
My prior comparisons and advance calls suggest we see negative revisions in nonfarm payrolls from 2023 Q2 to 2024 Q2 of well over one million. My initial stab is about 1.2 million to the downside.
The BLS Birth-Death model is seriously messed up an/or the BLS is oversampling large corporations and under sampling small businesses.
The BLS monthly nonfarm payroll reports are consistent garbage.
On January 3, I noted ISM Manufacturing Contracts 9th Month and the 25th Time in Last 26 Months
ISM manufacturing is still in contraction. Employment weakened further.
On January 29 I noted Trump Announces New Tariffs on Computer Chips and Semiconductors
Trump goes after Taiwan in a spat over semiconductors.
January 23, 2025: A Great Tariff Experiment as Trump Repeats Threat of Universal Tariffs
All eyes are on February 1 as Trump renews his threat for universal tariffs.
If Trump places 25 percent tariffs on Canada and Mexico, he will be breaking his own USMCA deal with potentially very serious implications.
No country could ever expect Trump to honor deals he makes.
Mish – does real final sales also include imported goods?
The trouble with tariffs…Sure, we used to fund fed gov exclusively by tariffs and excise taxes but that government was a teeny-tiny fraction of the size and scope of our current Leviathan…uh, I mean “Limited Constitutional Government”.
“For example, you buy something from Amazon produced in China, that erroneously adds to GDP. To correct the error, the BEA subtract imports.”
How do the academic eggheads figure it out? A clothing item produced in China can cost 1$ at source, and retail for 100$ in fashion stores. Similarly for many item consumer items.
It’s much simpler to count all consumption and deduct imports. No one tracks consumer sales based on whether the product is foreign or domestic. On your example, all sales from The Gap are counted as consumption and then The Gap’s imports are probably determined by purchases of foreign exchange.
Mish, any thoughts on Mark Skousen’s take that his GO is a better tracker than GDP?
https://www.perplexity.ai/search/how-does-mark-skausen-have-a-d-L4lnh8Y9QtufffX9uyWODQ
So in about a week’s time, GDP nosedives from 3.2% to 2.3%.
That’s a huge revision in such a short period of time.
Indeed, read all about it! https://mishtalk.com/economics/final-gdpnow-forecast-for-q4-drops-0-9-percentage-points-on-trade-data/
From the NAR: Pending Home Sales Fell 5.5% in December
Pending home sales retracted 5.5% in December – following four consecutive months of increases
Apparently, a large supply of electricity for the northeast, including NYC, is generated in Canada. Mike Carney floated the thought that Trump getting too cavalier with his use of tariffs against Canada would cause Canada to cut electricity exports. Saturday the 25% tariff on imports from Canada and Mexico are to commence; I do not understand why we would tick off the Canadians nor the timing as they are between PM’s, thus no one to lead in solving the differences real or perceived.
Maybe tariff wars will become less easy to win than Trump has suggested and maybe the egg on face will be very sticky.
That would be a great “excuse” to declare war under the guise of electricity is a national security issue.
I saw a news flash on my phone that Trump wants to end New York City’s congestion pricing. I thought states rights were supposed to be a thing now after Roe v Wade?
All rights are mine now. Free will comes only from my magnanimous allowances.
Canada would never cut power exports. That would be like “cutting off their nose” – they need the money from those sales too much.
The ATL FED was spot on after dropping their estimate by 28% just YESTERDAY.
The $2 Trillion federal budget deficit is a hell of a drug.
That was the last of the juggernaut economy from the former administration, it’s 100% Trump from this point forward. 100% bwahahahaha!
No Golden age for you… how about a nice vacation at GITMO?
That may be an improvement after this administration crashes the economy and government.
The Econ has already crashed.
We’re not letting you in the sex dungeon.
Buddy, whomever you are, you are great at shit posting. I’ve started to skip Mish’s articles and come straight to the comments hoping thar you’ve already left me some gems. Bravo good sir, BRAVO!!!!
What disrespect is this?!? I WILL BE TAKEN SERIOUSLY!
That should be escribed inside an Egyptian mummy’s tomb for all posterity.