The GDPNow nowcast jumped from 2.0 percent to 2.5 percent on stronger than expected retail sales. 
GDPNow Chart Notes
- The base forecast, and the one most observers watch but shouldn’t, is the blue line above.
- Real final sales is the bottom line estimate of the economy.
- The difference between the two lines is Change In Private Inventories (CIPI) which nets to zero over time.
- RFS is not always below the base forecast. That just happens to be the case this quarter.
The July 16 GDPNow Model estimates a nowcast of 2.5 percent.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 2.5 percent on July 16, up from 2.0 percent on July 10. After this morning’s retail sales report, the nowcast of second-quarter real personal consumption expenditures growth increased from 1.6 percent to 2.1 percent.
A nowcast is the current running estimate that tends to be more accurate over time. It’s not a forecast of events.
My first instinct as posted on Twitter was for a net bounce due to “better than expected” retail sales. But the details seems so weak, especially auto sales that I did have a strong position on how the model would react.
Understanding GDPNow Reactions
“Better than expected” means better than the model expected not better than economists expected. In this case, both were true.
It’s not whether the report was good or bad or better than economists expect that matters.
Instead, to guess the reaction by GDONow to economic data, one needs to guess what the model expected, not the actual report itself. This is why the nowcast sometimes rises on bad data or drops on what appears to be good data,
Today the model was as surprised as the economists by retail sales. In contrast, the model had almost no reaction to seemingly poor trade data. The model expected the trade data.
Contributions to the Nowcast
The contribution to net exports since the last report on July 10 was a minimal change from -0.79 percentage points to -0.74 percentage points, and increase of 0.5 percentage points.
Buying more stuff contributed 0.10 percentage points to PCE goods and eating out added 0.28 percentage points to PCE services, a total of 0.38 percentage points.
Other changes between July 10 and July 16 raised the total net contribution to the base model of 0.5 percentage points and 0.4 percentage to real final sales.
Real Final Sales
The nowcast of real final sales is 1.7 percent up from 1.3 percent. That is the number to watch.
Bond Market and Crude Reaction
Yield on the 30-year long bond fell from 4.45 percent to 4.38 percent.
Yield on the 10-year note fell from 4.23 percent to 4.17 percent.
The price of West Texas Intermediate crude fell by $1.03 to $79.82.
Neither the bond market nor energy market seems to believe this report, and I am not sure I do either.
Retail Sales Stronger than Expected, But Look at the Details
For more on retail sales please see Retail Sales Stronger than Expected, But Look at the Details
Nonstore sales (think Amazon) were up 1.9 percent from a month ago. Motor vehicles and parts fell 2.0 percent. This behavior has been ongoing since April of 2022.
Also see Fed Chair Jerome Powell’s warning to Congress: The US Really Needs to Fix the Unsustainable Deficit
All the traditional economic metrics used to report on the economy feel so meaningless to me now, when there are clearly two widely divergent economies. One economy for those with assets and low interest debt, and another for those without assets and (typically) high interest debt. It’s as if, say, you keep getting readings of five on a scale of ten…well it doesn’t tell us if there’s a bunch of 9’s and 2’s in there with very little in between, or simply mostly 5’s. We now know this is all a result of the financialization of every single aspect of the economy, and the slow but steady outsourcing of manufacturing jobs overseas.
An interesting view. You can call it what you want. Capitalism. Free markets, The American way. Survival of the fittest. The wild west. Freedom. Independence.
When has the US not been like this?And you cannot change it. You are on your own. Adapt and thrive.
The US was not like this after WW2 because we were a manufacturing economy (and our only two competitors were turned to rubble, by us, curiously). Of course there were wealthy elites but for the most part, societal wealth was a fairly geometric gradient. A recession would affect most people on the gradient the same way (directionally, not necessarily the magnitude of suffering). Today, it is totally different, as due to financialization, one end can benefit WHILE the other end suffers.
Does that align perfectly with CC Purchases? If people are buying at this point, most is on a CC, Won, Borrowed or Stolen. Cash isn’t hanging around most homes in this Country any longer, unless they aren’t paying there Bills…
Mish, please clarify something for me. You said:
But by i think the overall equation is:
Domestic production (GDP) + net imports = final sales + change in inventory.
Your statements above seem to ignore net imports.
Not to mention private domestic investment and government spending.
TAX REFUND TAX REFUND TAX REFUNDS!!!
It seems the so called EXPERTS forget this happens almost every year, where there is a boost in spending at the end of spring and beginning of summer!!!
It seems the so called EXPERTS have amnesia!!!
Which again will be played out in Aug/Sept!!!
Well it seems some people here, hate facts!!!
Are they part of the so called EXPERTS???
Despite all the bitching and moaning about the *direction* things are headed, where things are currently at is still pretty good. It will take a while longer to wring out the inflation, because the economy is still on the hot side. If it weren’t, services inflation could not be on fire, as it still is. It amazes me that people totally overlook something right in front of their face. They don’t believe their own, “lying eyes”. Lol! GDP will likely be over 2% this quarter, but ” It’s the end of the world!” Lol! BTW Services make up 60%+ of the economy.
PS My own spending is up 50% since two years ago (I track it meticulously), so all I have to do is look in the mirror to see the source of the problem. *Everyone* should try that instead of bitching and moaning, because I know *all of you* have cranked up your spending rather than cut back.
I don’t need to track my spending. I would rather track my fitness level and workouts. When you work hard to grow your wealth (along with your health) you don’t have to worry about your spending.
Bitching and moaning is the new American pastime. Along with following cult conspiracies. If people would use their time to improve their lives instead, we would have a much stronger country.
Somebody who resides in their MANSION and hires others to do their shopping???
Seems like continued slow growth to me.
And the oil price drop was more likely due to “expected” lower demand from China.
Oil inventories dropped in the US again last week. Three weeks in a row of falling inventories.
“better than expected” = more “doctored” than expected?
It would be an unlikely but welcome event if the Fed actually vocalized a day after being dovish that the economy can weather the higher-for-longer FFR for a bit longer given we still don’t have a 2 handle in front of the official inflation figures.
I tire of the asymetric Fed response that punishes us; would be welcome for a change to take in all the data points and stick to their fictitious 2% target rather than the make-up-whatever-you-want reason to run inflation hotter than 2 and keep backstopping the financial markets.
Either you want to solve the problem of inflation or you don’t. Taking a foot off the brake early would prove they don’t really want to, they want the unrelenting passive income enrichment to continue.
Cars and parts prices are down 4.2% yoy, so the weakness in nominal sales is deflated away to some extent.
It’s getting better all the time. It couldn’t get much worse.