Is it normal for the economy to run out of steam as the quarter progresses? GDPNOW says yes.
GDPNOW archives the 75 most recent estimates which cover about four quarters. In each of the last four quarters the GDP estimate peaked between the 2nd and 7th release. They issue about 19 releases per quarter. So, on average, it peaks about 1/4 of the way through each quarter. The yellow box in Mish’s chart reflects the early peak this quarter.
Further, the final GDPNOW readings is at (3Q 2021) or close to the lowest estimate for a given quarter. It always closes closer to the low than the high.
This leads me to wonder why GDPNOW peaks early and is consistently overstated. I know it’s a small sample. Does older data confirm these patterns?
KidHorn
1 year ago
Recessions are always predicted to be shallow and short. It’s always different than the last one. And then something no one predicted like 9/11 or financial institutions suddenly being cut off because they’re too risky to loan to. There are a myriad of potential black swans to send our economy into the abyss that are being completely ignored.
Salmo Trutta
1 year ago
I think Trump was right:
““The Fed is like a powerful golfer who can’t score because he has no touch,”
he wrote. “He can’t putt!”
Latest estimate: -1.2 percent — July 27, 2022. There’s
no way this could be correct without a major error in the money stock #s.
Stop/go monetary mis-management under Powell has never been worse. The FED has
lost control.
Jojo
1 year ago
“Based on Analysis of the Final Q2 GDPNow, a Recession Started in May”
i’d guess 5 or 10 years. stagflation is what is happening. will take the fed to take rates to match inflation. actual is pushing 20%. this is gonna be a long slog.
The Chicago Fed National Activity Index (CFNAI) was unchanged at –0.19 in June.
Following a period of economic expansion, an increasing likelihood of a recession has historically been associated with a CFNAI-MA3 value below –0.70.
The CFNAI Diffusion Index represents the three-month moving average of the sum of the absolute values of the weights for the underlying indicators whose contribution to the CFNAI is positive in a given month less the sum of the absolute values of the weights for those indicators whose contribution is negative or neutral in a given month. Periods of economic expansion have historically been associated with values of the CFNAI Diffusion Index above –0.35.
Casual_Observer2020
1 year ago
We got a 1 year lead time from one of our suppliers today. And it was due to excessive demand and not supply chain issues. Go figure. I think there are productive parts of the economy and non-productive. FIRE (Financial Services, Insurance, Real Estate) are never productive industries at a baseline. They rely on the productivity growth part of the economy in order to thrive. What we’ve had in those industries is asset speculation due to excessive money flowing to those sectors due not to great productivity growth but factors unrelated. So that part of the economy is coming back into line with the actual economy. This is good news in a way. I think productivity growth has averaged somewhere like 1-2% over the last decade. This is probably where the economy will settle back to. Count me in the bunch that until we see unemployment double from where it is, there will be no recession for most people. And inflation will come back down big time in the meantime.
Whether we are in a recession or not is an academic question. What is happening for Joe six pack, corporate profit, and asset prices is the real question. Joe is suffering from 10% inflation but low unemployment, corporate profits, while mixed, are rising, and asset prices are also mixed. Housing flat to down, gold down, commodities down, stocks down but well off the lows. I’ll stick with stocks and real estate.
I’d rather have this than 2007-2009 or 2000-2002 recessions. FWIW, I’ve changed my definition of recession to when I lose my job because of economic conditions as I did in 2001 and 2009. What we have right now is nowhere near a recession. Going from 5% GDP to ~1% GDP doesn’t qualify even with 8% inflation. Let’s see unemployment numbers like 2001/2002 or 2009 before we start talking about a real recession.
The US is not in a classic recession, but that doesn’t mean I’m okay Biden redefining what one is. As such, the Bureau of National Economic Research isn’t going to declare a recession anytime soon. The negative growth is primarily related to three things: a significant pullback in inventory purchases, the continued decline in real income, & a drop in manufacturing. However, retail & unemployment are holding up fine. And the inventory glut will begin to correct itself by the end of Q3 due to continued strong demand. Unemployment may not turn negative for many more months, possibly not until early next year. Housing is going to continue to erode, but it’s not going to completely fall off a cliff. The Fed won’t let that happen, not will Congress. The Fed & Congressional puts are very much alive & well. What matters is the natural gas market which is going to be a major issue for Europe & the US given our excessive LNG exports. As is the case today, energy, rent & food prices this winter will determine whether or not inflation recedes. Wild card: China’s real estate market.
That’s after it climbed a mountain. For 10 years. The only places I see cliff diving are places that appreciated too much because of Covid. Those places will suffer the worst because they had the most appreciation since 2020.
Yes, housing is down and will continue to decelerate. But as we all say here, real estate is local, so the drops are going to be very uneven. Tanking from what was astronomically high prices and robust sales isn’t worth talking about. It was inevitable. What matters is what happens over the next 12 months. Again, the 30YFRM will slowly dip below 5% by the end of the year, possibly by this fall. If you are correct and there’s shallow job losses (my definition: 6 months or less of not more than 150K per month) and then stabilizes, we’re looking at housing turning around by no later than this time next year due to lower prices and sub 5% mortgages. Rent, food & petrol are all going to stay higher than historical norms. And when I say what happens next is important, we all know that includes the Fed pivot & puts. And, what matters the most is whether or not renewed rent & mortgage relief arrives if things get worse than my personal predictions. If so, then we’ve entered into a NEW ECONOMIC PARADIGM, and let’s not call it a good one.
We’ll of course, but what does that say or mean? And I don’t disagree that these “multipliers” may very well kick in. However, what I want to know is what does everyone think is going to happen? Specifically, will there be rent & mortgage relief, if things get on the bad side. Could the Fed pivot and start cutting rates in what becomes a somewhat stabilized housing market?
I went to Redfin and checked one single filter “Price Reduced – Past 60 Days” for three markets:
City No. of Home Reduced / Total number homes.
Houston 374/8947
Chicago 506/9900
Austin 42/3498
Most of the reductions have been $5k to $20k with prices still sky high. I’m still trying to buy rental properties and can’t find any reasonably priced. I will keep waiting. Only 374, 506, 42 homes listed on Redfin had price reductions in Houston, Chicago, Austin, respectively.
“Arrived Homes acquires single-family homes to use as rental properties, then sells shares of these properties to investors through its online platform.”
If retail sales are to hold up, revolving credit and cash out refinances will be the reason. Wages won’t be the reason.
I live in Boise, I fully expect a 30% drop in houses prices from May 2022 to May 2023. Housing price decreases has already started here.
I saw a car ad during last weeks golf tournament. Unashamedly, the commercial stated a Jeep Grand Wagoneer starting at $90,000. I couldn’t believe it.
Something has to give.
Six000mileyear
1 year ago
Germany’s reliance on oil for manufacturing will inevitably lead to a deep recession, which will ripple through the West. And that’s something no central bank can solve short of changing the rules. I don’t see how the US can avoid some loss of economic activity with Germany.
cost of food and housing is off the hook. when europe winter creates a depression there from fuel pricing……it will spread here, most likely. slowing economy is the stag. cost to find housing and food is crazy. the flation. stagflation is brutal. can last for years and years, too.
You just identified the trigger for Fed changing course this fall while attempting to save face as “inflation hawks.” Politicians can not go into the midterms with 6% mortgage rates.
By recent standards of recessions this one would appear to be very shallow. I expect the Fed to slow the pace of the rate hikes.
Zzzlaverdad
1 year ago
Hmmm. Last minute Hail Mary and we see a miraculous positive GDP.
JackWebb
1 year ago
Q1 was negative. There was a blip in the first month of Q2, but that shouldn’t cancel out the other 5 months, or the quarterly totals.
Casual_Observer2020
1 year ago
Let’s be honest. The boom was because of real estate and impending bust is for the same reason. Companies that contribute to productivity growth will do fine. Speculative companies will go bust. The biggest beneficiary of speculation during the last few years was real estate. It is now starting to collapse from places that were the biggest beneficiaries like Boise, Idaho. The same will apply to places in the south and parts of the midwest. International money also drove sellers in high cost areas to sell and move lower cost places. Now that the tide is receding, it will keep receding out of sheer momentum.
The boom was because a lot of people received a lot of money they didn’t expect to get, and they had a lot of expenses they did expect put on hold or cancelled. A tsunami of liquidity showered on millions of folks unfamiliar with the technical meaning of the word “liquidity.” Telling some people they don’t have to pay $1000 in monthly rent is almost as good as giving them $1000. Some fortunate folks with high paying “remoteable” jobs (read computer/internet) got a windfall from not commuting and not buying lunches, dinners, clothing.
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I think Trump was right:
““The Fed is like a powerful golfer who can’t score because he has no touch,”
he wrote. “He can’t putt!”
Latest estimate: -1.2 percent — July 27, 2022. There’s
no way this could be correct without a major error in the money stock #s.
Stop/go monetary mis-management under Powell has never been worse. The FED has
lost control.
The Chicago Fed National Activity Index (CFNAI) was unchanged at –0.19 in June.