The GDPNow and Nowcast forecasts for GDP are on a similar track this quarter.
The base forecasts are 1.6% and 1.4% respectively, whereas spreads were frequently over a full percentage point in previous quarters.
Real Final Sales
Real final sales represent the true bottom line estimate for the economy. The rest is inventory adjustments that nets to zero over time.
A bottom-line GDP print of 2.6% is nothing to sneeze at.
Rate Cut Odds
Based on real final sales, there should not be a rate cut this month, assuming GDPNow is accurate, but that’s quite an assumption.
Meanwhile, rate cut odds are 100% and Half-Point Rate Cut Odds Explode to 71%.
The Fed tried to walk back expectations of a 50 basis point cut on Friday, but 25 points minimum is a given.
Inventories
I am skeptical of the GDPNow real final sales estimate because of a buildup of inventory.
On July 3, I commented the Manufacturing Sector is Rolling Over But Inventories Keep Piling Up.
Meanwhile, the BIS warns of Diminishing Returns of Monetary Policy, Zombies, Junk, Complacency.
The crosscurrents are very strong this month
Mike “Mish” Shedlock
Already in “Stagflation”. The Guvvamint’s inflation figures are under-stated and GDP figures over-stated.
Borrowed (printed) 16 trillion in the last decade and nothing (zero)to show for it.
Rate cuts and increases take about a year to impact the economy anyway. That’s why the Fed usually cuts at the wrong time, and increases at the wrong time. It would be far better if they just quit trying to fine tune things, and focused on maintaining an orderly management of the money supply.
If by the economy you mean main street then yes. But a bigger chunk of the economy is just asset prices on wall street. They will love cuts and celebrate. As time has gone by this last cycle, a bigger chunk of the population is using the market to supplement their income. This also impacts main street more than previous cycles or eras. More people are realizing that you have to dance while the music is still playing.