The GDPNow forecast for third-quarter GDP fell to 1.8% today on weak economic reports.
Gold and Treasuries Rally
GDP Estimates
https://twitter.com/UPFINAcom/status/1179102506275807233
Oxford Estimate
https://twitter.com/UPFINAcom/status/1179033569676681216
Real Final Sales
The important number is “Real Final Sales“.
That’s the bottom line estimate for the economy. The rest is inventory adjustment which nets to zero over time.
The GDPNow estimate of Real Final Sales fell to 1.6% today, a new low for the series. It’s near, and possibly below the economic stall point.
Also, please see my report today: Manufacturing ISM Worst Since 2009 on Severe Contraction of Export Orders.
Mike “Mish” Shedlock
High value added businesses and skilled labor continue to do just fine — growing gangbusters. They tend to have minimal debt and little need for additional financing.
Commodity businesses and unskilled labor are continuing to circle the drain — more store closures. They tend to have piles and piles of debt, and express a need to issue more debt just to keep the doors open.
Both the above have been the case for the last decade. Nothing in Mish’s post suggests anything has changed for either subgroup.
Government “growth” is the thing that has changed. I wish Trump was draining the swap like he promised, but it looks like a lot like all G7 governments have hit “peak debt” or peak effective debt anyway. Endless government debt increases no longer create enough bubbles to even conceal the debt used to create the bubbles. Trillion dollar deficits are “needed” just to stay in place
Government debt is “crowding out” borrowing by low value added business and low skilled labor. Why take risks and face huge losses in another redundant retailer, when sovereign debt only loses 2%? Why finance a money losing shale oil driller and lose 50%, when sovereign debt only loses 2%?
All the G7 economies (and China too) are going through a forced restructuring, where pointless losing activities are being culled despite objections from those same governments. Like the UAW, the bureaucrats aren’t going down without a fight.
The fall of Detroit was bad for UAW, but the rest of the country muddled along OK while GM plants closed one by one — and then non-Detroit started growing.
Same here. Redundant retailers are going. The limits of government efficacy are obvious to everyone except Sanders and Warren and their socialist supporters. The rest of the country is muddling along OK.
UK may already be in recession. Currently the roads are busy and money changing hands. Was in Italy very recently and business level appeared higher than I’ve seen for a while.
Data and anecdote.
http://moneymovesmarkets.com/journal/2019/10/1/uk-data-wrap-cbi-confidence-slump-money-trends-stabilising.html
Another Trump hoax is on us. Drudge reporting that ballistic missiles were fired by North Korea into the Japan economic zone. Looks like it is back to how it was under Obama. More bad news for Trump.
So, Mish, we have an earnings drought, manufacturing at depression levels and collapsing as I type, I would bet my last buck the employment report is going to be just sad on Friday.
And I say inflation is now running about the same temperature as it was in 1977, double digit at least. We all know housing (buy or rent) is that high, I just had to buy a couple boxes of Duraflame fireplace logs at Costco yesterday, I remember when I moved back from Las Vegas February 1st I got the last two boxes they had, $22.49 each and I was pissed because just a few years ago they were $14.99. They quit carrying them for the summer (in February???) and just got them in for the winter yesterday, $25.99, that is a 15.56% increase since February. By the way, it was one of the coldest February months on record, and it was one of the coolest summers we have ever had, we only barely got to 100 on three days, two were in the spring. Now we just had the coolest and wettest September anyone can remember. Frost last night already.
And I can go on citing almost everything I have to buy being up by at least ten percent in the last year with very few exceptions, but the worst of it is produce. Fresh food.
Normally we see winter pricing on fresh food that is a lot higher than summer and especially fall (harvest time) because in winter it is mostly imported. Mexico and Chile, Columbia are big food exporters to the US. But, this year the winter high prices never went away, even in September tomatoes are $1.99 and Onions $1.49, more than double the usual summer prices. Broccoli? Unbelievable, it is still over $2 per pound. And even canned goods, a can of refried beans usually 59 cents on sale two for a dollar, now a buck 79 on sale for a buck 49. For freaking beans!
Beef, hamburger is cheap now, I even saw premium 93% lean at $2.49 and the cheaper 80% at $2.79 this summer, but there is a reason for this that spells disaster, dairy farms are going under at a record pace and their herds are being turned into ground beef, most are elderly milk cows going to slaughter and they are too old and not raised to be beef cows. Once they are gone hamburger is going to skyrocket and so are dairy products. Otherwise, steak cuts are ranging between $16 and $32 for fillets. And fuck me but pork is sky high, because China is a huge pork consumer and they have had to slaughter (still are) their pigs because of African swine flue in their stocks. Guess what? African swine flu was just identified in Hungary as the cause of death in 5 feral boars in Europe. Soon North American pork will be the only pork on the market, look for pork to double by Christmas and an Easter ham next year will be had only by people that see this and buy today and freeze it. We are talking probably $10 per pound for bacon if not more.
Oh and gasoline. Those who say we can’t have inflation without gas prices rising, go diddle yourself, they are rising. Yes, there was an attack on Aramco facilities that slashed Arabian production by half but, we now import less than 10% of our oil, (91% of our oil consumption is domestic) and most of the rest comes from Canada or Mexico. On that very day gasoline went up about $12 cents before the stations closed that evening and in the days since SA claims that production is back to normal, so fuel prices have dropped back to normal right? Not on your nelly. It went up again last Friday, and again today, was $2.69 here before the attack, just went to $2.93 today. And premium is now $3.31, these are record price fixing profits, the markup from refiner to pump has never been higher, ever. Either in gross amount or as a percentage. That is also a major warning sign of recession, every time gas goes high in relation to other prices we fall into hard times. Gas might be cheaper than by some historical standards, but last year (I know you all have very short memories) gas was at least a dollar cheaper in most markets, BEFORE the attack on Aramco, I remember it was $1.69 in Las Vegas last October because I had to buy premium at $2.019 and thinking damn, I wish I could buy regular. Under two bucks a gallon. Now I pay more than 3. Short memory or not fuel is now near 70% higher than last year. That is not even inflation, it is hyperinflation.
Here is how well tariffs are working: The tariffs to protect the steel industry are resulting in shutdowns:
Governor of Louisiana has no idea what he’s talking about which should not surprise anybody since he and his party oppose the President. Bayou “was” a distressed steel mill that was purchased with a boatload of debt in 2016 by a PE firm out of Conn. It’s product offerings are/were as generic as it gets in the steel world and they had zero pricing power, Nucor sets the price and is a far far superior mill than Bayou ever thought of being..
Demand\pricing has softened worldwide for generic steel products and the ownership made a gross miscalculation in terms of profitability of their investment. Hence, shut it down!
This will not be the only US steel operation to go out of business. My two favorites to fail are AKS and X due to legacy costs, no pricing power, and inefficient operations.
Places like this will go bust. It will be worse in the midwest and rural south.
Only thing keeping GDP in the black is soaring prices,soaring costs,inflation/shrinkflation tops 15%…easily!
Why are estimates of 3rd quarter relevant now that the 3rd quarter is over?
It’s like forecasting who will win a game after the game is over.
the interim changes are like doing the same as the game is played.
Maybe the weather forecasters should use this method.
Once the economy does tank, everyone will get on board with impeachment. The economy was the only thing that kept people looking the other way. The rest of 2019 and 2020 is going to be difficult.
You have called 10 of the last zero impeachments.
Have you even bothered to look how many Presidents have actually been impeached? And of that small number, how many were removed from office?
Even if Schiff had a case (and Pelosi would be running the impeachment herself if there was a case) — what are the odds of your silly fantasy ever happening?
Its getting boring listening to you and MSNBC telling us that we are just moments away from Trump being removed.
Lol. Keep writing country bob. Everyone (including mainstream democrats) said it was over after the Mueller probe. I took the opposite view. I was right. End of story.
Roadrunner Transport announced 6000 layoffs today. That can’t be good for future consumer goods or manufacturer’s supply chain.
Poor Q3?
Despite the “use it or lose it” from US government (fiscal year ended September 30th) … what prop for Q4??
NRF (national retail federation) typically gives its forecast for Holiday sales the first few days of October. Last year predicted 4.3% to 4.8% growth. It will be interesting to see this year’s.
It could be worse, though. Just watch the next quarterly reports from the EU. The question is how aggressively and how fast the Fed will lower rates til zero or below. Because hey….what’s another trillion in deficits.
Yep, only a matter of time before ZIRP / QE4.
Grab some popcorn and wait for inevitable DJT tweetstorm castigating Powell/FOMC for too little too late (wouldn’t make any difference, though … recession baked in at this point).
One $Trillion+ in Federal deficit spending, interest rates near historic lows, “household net worth” at or near all-time highs and all we can manage is pathetic GDP growth of under 2%. Something is amiss.
2008 never really ended. If it did, the Fed would not still be involved.
“Something is amiss”
…
Need a coughing canary?
Deutsche Bank down 14% past 2 weeks … probably nothing …
Isn’t this good news? Moar Fed?
We have been winning so much it almost seems unfair.
Let the Winning begin!