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The final GDPNow estimate for second-quarter GDP is out today.

The final GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2018 is 3.8 percent on July 26, down from 4.5 percent on July 18. After this morning's advance releases on durable manufacturing, private inventories, and foreign trade in goods from the U.S. Census Bureau, the nowcasts of the contributions of inventory investment and net exports to second-quarter real GDP growth declined from 0.72 percentage points and 0.32 percentage points, respectively, to 0.58 percentage points and -0.10 percentage points.

Yesterday's new homes sales report, not noted above, took off 0.1 percentage points from residential investment. The other 0.6 percentage point decline was from today.

Real Final Sales Forecast Higher Than Base Forecast

The wholesale and retail trade reports, both flat, caused the GDPNow model forecast for Change in Private Inventories (CIPI) to decline from +0.32 to -0.10.

This explains why the GDPNow base forecast is lower than real final sales. Over time inventory adjustments net to zero so real final sales is the true bottom line estimate.

Estimates Scaled Back

The Wall Street Journal reports U.S. GDP Predictions Scaled Back on Eve of Report due to "underwhelming economic data."

Forecasting firm Macroeconomic Advisers on Thursday projected a 4.5% seasonally adjusted annual growth rate, down from its Wednesday prediction of 4.9% growth. Economists at JPMorgan Chase cut their GDP growth forecast to 3.9% from 4.4%. Barclays kept its GDP tracking estimate unchanged at 5.2%. The Federal Reserve Bank of Atlanta’s GDPNow model reduced its forecast to 3.8% from an earlier estimate of 4.5% growth.

Markit Forecast

Commenting on the Fash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The July survey data indicate that the US economy sustained strong growth momentum after what looks to have been a solid second quarter, representing a good start to the second half of 2018. Although down from June, the July flash PMI is in line with the average for the second quarter and indicative of the economy growing at an annualized rate of approximately 3%.

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ZeroHedge, Mish

I asked Tyler Durden (aka ZeroHedge) for his estimate. Moments ago, he replied 4.4%.

My guess is 3.4% but hardly anything but a print over 5% or under 2.5% would surprise me due to major seasonal revisions applied tomorrow. My guess is simply a 60% factor for GDPNow plus a 40% factor for Nowcast.

Economic Estimates

  1. Barclays: 5.2%
  2. Macroeconomic Advisers: 4.5%
  3. ZeroHedge: 4.4%
  4. JPMorgan Chase: 3.9%
  5. GDPNow: 3.8%
  6. Mish: 3.4%
  7. Markit: 3.0%
  8. Nowcast: 2.7%

In case you are wondering, the average of the above eight is 3.9%.

Major Backward Revisions Tomorrow

Complete Silliness

On top of the typical inflation and imputation nonsense, the BEA will apply major seasonal revisions tomorrow. Those revisions go all the way back to 1929.

In July, the BEA will "Apply seasonal adjustment improvements to theentire GDP time series*. (Annual figures stretch back to 1929 and quarterly figures back to 1947)*."

Such revisions highlight the silliness of all these estimates, mine included.

Mike "Mish" Shedlock