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

April 26, 2022

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6:35 pm

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48 comments

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Economics

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

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.

It’s important to understand the wealth effect impact.

People who thought they had savings in ARK or Netflix or whatever bought cars or second homes or vacations. Some retired early.

Now what?

Expect More Stock Market Pain Because It’s Cominghttps://t.co/82EHRVEpEX

— Mike “Mish” Shedlock (@MishGEA) April 24, 2022

Bubbles Pop

1. It’s important to understand that bubbles eventually pop on their own accord.

2. The Fed is now aggressively (allegedly) hiking into weakness. I suspect we will see 2 half-point hikes

3. Demand destruction from stock market and mortgages is easily enough to cause a recession https://t.co/Zts6OnphW3

— Mike “Mish” Shedlock (@MishGEA) April 26, 2022

Here’s a view that mostly agrees with mine.

We will soon see the biggest #Wealth destruction in history, bursting the asset and #Debt bubbles of the last 100 years. Most people will not realise what has hit them until it is too late.

— Egon von Greyerz (@GoldSwitzerland) April 26, 2022

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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48 Comments

Newest

Oldest Most Voted

KidHorn

4 years ago

After final revisions are released in 6 months or so, we may have already entered a recession.

Tony Bennett

4 years ago

Reply to KidHorn

Very likely.

Lisa_Hooker

4 years ago

Reply to KidHorn

As usual they will eventually (well into a recovery) tell us that we were in a recession, back then.

Nuddernoitall

4 years ago

is it time again for the return of the dark side of the (investing) moon?

S&P index Jan 2000 …about 1,473 …and 13 years later….

S&P index Jan 2013 … about 1,473 … and 9 years later …

S&P Index Jan 2022 … about 4,600 …. an average annual gain of more than 23%

So, what side of the investing moon do you wish to live on?

You can’t always get what you want

But if you try sometime you’ll find

You get what you need

Sunriver

4 years ago

The worse, and most probable outcome, is years or possibly a 1929 to 1954 event of stagnant markets returns. That can happen either by hyper-inflation with the FED and their genius economic engineering or fundamentally induced asset deflation. Either way, the saturation of worthless technology will be of no help. It’s a meat and potatoes multi generational household world going forward.

Casual_Observer2020

4 years ago

Reply to Sunriver

Household formation may well go the way of Japan here in the US.

Lisa_Hooker

4 years ago

Reply to Sunriver

Not meat and potatoes. Potatoes and cabbage. And some carrots. And on Sunday perhaps a wee bit of bacon.

Casual_Observer2020

4 years ago

This is going to be a painful decade ahead.

Lisa_Hooker

4 years ago

Reply to Casual_Observer2020

I fear that long about 2028/9 they will be talking about a really painful decade ahead.

Six000mileyear

4 years ago

The USD is rocketing higher.

How much is repatriation to pay off debt?

How much is repatriation to avoid anticipated higher Federal taxes?

How much is flight to safety?

There may be a big problem in the foreign exchange markets.

KidHorn

4 years ago

Reply to Six000mileyear

My guess is mostly higher yields. The Euro will likely follow soon.

JeffD

4 years ago

New home unit sales are 14% higher than March 2019 (667K back then), so not exactly weak.

thimk

4 years ago

Spoiler alert : did you know that ETF’s exacerbate volatility ?

https://www.forbes.com/sites/forbesfinancecouncil/2020/04/28/etfs-are-exacerbating-market-volatility/?sh=77fb898f2477

Maximus_Minimus

4 years ago

Reply to thimk

ETFs create volatility by automatic rebalancing by algos while big banks and hedge funds on behalf of their billionaire clients using algos is great.

Is this some Forbes propaganda piece?

Maximus_Minimus

4 years ago

Reply to thimk

The bigger problem with ETFs as with other funds is that when redemptions accelerate, they sell the most liquid assets, leaving the fund with the worst, but this piece wasn’t even concerned about that.

thimk

4 years ago

Reply to Maximus_Minimus

they did allude to lack liquidity . And you are right when you sell an etf , the etf must find buyers of the many stocks it represents . some of the underlying assets may not have a bid in . Bond etfs i believe where once depicted as weapons of mass destruction.

MPO45

4 years ago

stock market bloodbath or buying opportunity? I haven’t pulled the trigger on Apple stock yet, will wait till after next week’s fed meeting but the temptation is so great. I could sell next week’s calls for a juicy $4 premium atm but I gotta have some discipline.

Of course, if apple tanks then the recession is officially here.

PapaDave

4 years ago

Reply to MPO45

Bought a few oils yesterday and sold them today. Still have a lot of oils and other commodity stocks. I will hold my banks and utilities. Every day is another opportunity.

MPO45

4 years ago

Reply to PapaDave

I am loading up on dividend stocks for the long haul. I expect wage inflation to continue to be high despite any “demand destruction” anyone here writes or comments on, too many boomers are leaving the workforce and it is hurting corporate america badly. Eventually, the ‘working class’ will feel the pain because it all rolls downhill.

Casual_Observer2020

4 years ago

Reply to MPO45

It’s hard to see wage inflation if a full recession occurs. I expect mass layoffs by fall.

PapaDave

4 years ago

Reply to MPO45

Agree. Also, I am expecting big increases in dividends from oil and gas stocks going forward. Many have already started the increases. Others are still paying down debt and will begin big dividend increases shortly.

PapaDave

4 years ago

Reply to PapaDave

Cenovus tripled its dividend today and the stock went up over 10%.

KidHorn

4 years ago

Reply to MPO45

Chase pays a $4 dividend and is priced around 125 I think. Not a bad yield for something that will never be allowed to fail.

thimk

4 years ago

well , well ,well, 2 trill+ in unspent stimies did not save the day ?? Freight fubared . stock market valuations rapidly decreasing to pre covid levels. To paraphrase Bush the 2nd: this sucker is going down . Run, Forrest, Run! Note : message enhanced with hyperbole / partial snark

thimk

4 years ago

Reply to thimk

Biden’s inflationary policies shortened the recessionary timeline (i.e he got us there quicker). Oh don’t forget millions more “dreamers” eager to

storm the palace as food becomes scarce (inflationary) .

jfpersona1

4 years ago

Reply to thimk

Really.

The “dreamers” are going to eat too much? That’s the big cause of all our problems?

Maybe you should wander around your local stores or get outside for a bit and talk to some real people. I don’t think most of us are worried about aliens (legal, illegal or UFO) eating too much as the cause of our pocketbook pain.

thimk

4 years ago

Reply to jfpersona1

I was referring to the number of “refugees” awaiting to enter the USA on our borders.

Captain Ahab

4 years ago

Reply to jfpersona1

As a broad generalization, first generation immigrants to the USA are a loss leader and do NOT pay for themselves. This is particularly true of economic migrants, and largely unskilled.Those immigrants who do pay their way, and more, tend to vote Republican, and are not sought after by those currently in power.

Bam_Man

4 years ago

Speaking of “bubbles popping”, GOOG is down another $75 after hours after reporting earnings.

Tomorrow is looking to be another ugly day in equity land.

Nuddernoitall

4 years ago

How much Gold do you want me to purchase Egon? Ok, back to the serious issue at hand. You realize that a consecutive quarter recession or maybe less, will tamp down the Bullard-driven Fed hikes. Is that getting us through the current storm faster, or should we just expect to pay a longterm penance for the many years we have had, at drinking at the bubbling trough of greed? So, what’s the best poison option here?

Captain Ahab

4 years ago

Reply to Nuddernoitall

Never presume the past will be the same as the future. There is a rational solution of ‘bite the bullet’, which is what should’ve happened in 2008. However, that would mean the USA’s first black president would be an utter failure, instead of a minor footnote to history (aka a failure).

We owe special thanks to those who voted democrat. Better this happen on their watch, than on the Republican watch

Captain Ahab

4 years ago

Next up, building inventories with bring ‘specials’. Around the corner, ‘going out of business sales.’

It was so predictable, even a fifth grader could do it, but not the Fed.

Tony Bennett

4 years ago

“I question the change in private inventories (CIPI) estimates as subtracting 1.2 percentage points from GDP.”

…

Yes. I don’t understand. Lower retail sales for 2021. While 2021 inventories revised +0.9%. Makes sense so far. Now, inventories suddenly drop in Q1? Why? Retail sales soaring? Business drawing down? Not sure I agree with either.

simb555

4 years ago

Its a market of stocks not a stock market. Oil,Gas, gold miners and fertilizer stocks plus USD are still doing OK.

PapaDave

4 years ago

Reply to simb555

My oil stocks are doing great. But the rest of my portfolio; not as well.

simb555

4 years ago

Its a market of stocks not a stock market. It is OK if one is in the right groups. Oil&Gas, gold, silver, fertilizer stocks and the USD are still doing OK.

Christoball

4 years ago

Reply to simb555

I would hardly call oil an orderly market

Christoball

4 years ago

Looks like the market indexes are down today in an orderly fashion. I think orderly markets are telling.

Tony Bennett

4 years ago

Reply to Christoball

The Bull is on the sidewalk stamping its hooves … outside of the China shop.

Fitting, since my guess it will be China devaluing that will kick off “disorderly”. Noticed a few others recently hinting at same.

Captain Ahab

4 years ago

Reply to Tony Bennett

You’re working for George Soros, right?

Esclaro

4 years ago

In November the Democrats are going to be destroyed. By 2024 we should see the end of the USSA to be replaced by a religious republic like Afghanistan except run by fundamentalists and QAnon lunatics. Anyone with any brains needs to get a second passport NOW. Eventually you won’t be able to leave.

Captain Ahab

4 years ago

Reply to Esclaro

Do not declare victory or defeat before the battle.Your comments reflect a heavy influence from the mainstream media who want to associate the right with religious fanatics, and Q–that anon person. If you actually look at the evil in the USA, it comes from the left, and always has. In a democrat sleight-of-hand, Biden asked democrats if they wanted to be ‘”on the side of Abraham Lincoln or Jefferson Davis?” Revisionist history??

GleninAK

4 years ago

Reply to Esclaro

Our country was founded by ‘religious fanatics’, and their libertarian values. The ‘religious right’ had a strong majority in the early 80s and early 2000’s and NEVER legislated like you suggest. What the heck are you talking about? We have very religious states in the USA. What is your example? Who do you listen to that feeds your impressionable mind like this. Please stop listening to them and find other sources. Please.

KidHorn

4 years ago

Reply to Esclaro

People like you said they were moving to Canada after Trump won. Seems no one actually did and the US didn’t come to an end.

Bam_Man

4 years ago

And if inflation was measured correctly, the growth number would be negative.

Mish

4 years ago

Reply to Bam_Man

Actual housing prices in the CPI or perhaps even better numbers for rent would do it

Bam_Man

4 years ago

Reply to Mish

Yup, and that is only one example. There are others.

Maximus_Minimus

4 years ago

Reply to Bam_Man

I could never imagine fake CPI would actually be positive. Now, if CPI would be measured correctly, the cretins would already have started another round of printing.

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

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