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First-Quarter GDP Forecast Dives to 0.4 Percent on Retail Sales Revision

Forget about a strong first-quarter GDP. Estimates had been falling since mid-March then took a dive on retail sales revisions.
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Data from Atlanta Fed, chart by Mish

Data from Atlanta Fed, chart by Mish

Real Final Sales is the true bottom line estimate for the economy. The rest is inventory adjustments which net to zero over time

Estimates Take a Dive

The GDPNow Model Forecast for real final sales dove a full percentage point on April 25 and here is the explanation from the Atlanta Fed.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2022 is 0.4 percent on April 26, down from 1.3 percent on April 19.

After yesterday’s annual revision to retail sales by the US Census Bureau, the nowcast for first-quarter real personal consumption expenditures growth declined from 3.8 percent to 2.4 percent.

Annual Revision

Retail sales annual revisions from Census Department

Retail sales annual revisions from Census Department

Tracking Bogus Estimates

  • Some of those revisions are pretty dramatic. 
  • For example, the Census Bureau revised non-store retail sales (think Amazon) up 9.5 percentage points and furniture down by up 7.9 percentage points.
  • The net result of the prior revisions took real final sales for 2022 Q1 down from 2.6% to 1.6% and the overall estimate from 1.3 percent to 0.4 percent.

The Annual Revisions show we have been tracking garbage retail sales numbers for a year.

The advance (first) estimate of first-quarter GDP is due Friday. The Bloomberg Econoday consensus is 1.1%. 

I'll Take the Under

Real final sales at 1.6 percent is not a terrible number but it's a far cry from 4.0 percent projection early in the quarter.

However, it's a number falling fast, and I question the change in private inventories (CIPI) estimates as subtracting 1.2 percentage points from GDP. 

Looking Ahead

Housing is weakening and the stock market is getting clobbered. Most people seem to have little idea what that will do to final demand.

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Bubbles Pop

Here's a view that mostly agrees with mine.

I seriously doubt the 100 years bit, but the idea is on the right track of thinking. 

New Home Sales Take a Big Dive From Upward Revisions

New home sales declined 8.6 percent in March and are down 12.6 percent from a year ago.

For discussion, please see New Home Sales Take a Big Dive From Upward Revisions

Expect More Stock Market Pain Because It's Coming

Meanwhile, please consider my April 22 post Expect More Stock Market Pain Because It's Coming

Today's stock market action looks very nasty again. 

Headwinds are enormous. Assuming the Fed hikes 100 basis points in the next two meetings we could see a recession easily by the third quarter even if the Fed then pauses.

This post originated at MishTalk.Com.

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