I did not see this one coming, and I doubt it sticks, but please consider the latest GDPNow Forecast for the third quarter of 2022.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 2.4 percent on September 30, up from 0.3 percent on September 27. After recent releases from the US Bureau of Economic Analysis and the US Census Bureau, the nowcasts of third-quarter personal consumption expenditures growth and third-quarter gross private domestic investment growth increased from 0.4 percent and -7.6 percent, respectively, to 1.0 percent and -4.2 percent, respectively, while the nowcast of the contribution of net exports to third-quarter real GDP growth increased from 1.10 percentage points to 2.20 percentage points.
The up-down, up-down pattern of the GDPNow forecasts turned up again.
Base Forecast vs Real Final Sales
The real final sales (RFS) number is the one to watch, not baseline GDP. RFS ignores changes in inventories which net to zero over time.
Spotlight on Current Real Final Sales (RFS) Estimate
- Base GDP Estimate: 2.4 Percent (Lead Chart)
- RFS Total: 2.4 Percent (Lead Chart)
- RFS Domestic: +0.2 Percent (Report Details)
- RFS Private Domestic: -0.2 Percent (Report Details)
Recession Off?
I keep getting asked that question and if these numbers hold, there will not be a Q3 recession.
That’s a big IF.
The quarter ends today, but there is still a full month of data yet to come, and I expect the data to be weak.
The reports causing this surge today did not seem that strong. But it is not the data that matters but what the model expected.
The data in the last two days was way stronger than the model expected.
For the latest income and spending reports, please see Real Spending and Real Disposable Income Inch Higher in August
This post originated at MishTalk.Com
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The Great Inflation was due to William McChesney Martin, Jr. changing from using a “net free” or “net borrowed” reserve approach to the Federal Funds “Bracket Racket” c. 1965. Note: the Continental Illinois bank bailout provides a spectacular example of this practice.
The effect of tying open market policy to a fed funds bracket was to supply additional (& excessive) legal reserves to the banking system when loan demand increased.
Since the member banks had no excess reserves of significance, the banks had to acquire additional reserves to support the expansion of deposits, resulting from their loan expansion. If they used the Fed Funds bracket (which was typical), the rate was bid up & the Fed responded by putting though buy orders, reserves were increased, & soon a multiple volume of money was created on the basis of any given increase in legal reserves.
This combined with the rapidly increasing transaction velocity of demand deposits resulted in a further upward pressure on prices. This is the process by which the Fed financed the rampant real-estate speculation that characterized the 70’s, et. al.
Interest is the price of credit. The price of money is the reciprocal of the price level. The money stock can never be properly managed by any attempt to control the cost of credit.
We should have learned the falsity of that assumption in the Dec. 1941-Mar. 1951 period. That was what the Treas. – Fed. Res. Accord of Mar. 1951 was all about.
and Dr. Anna Schwartz’s “A Program for Monetary Stability”: the
distributed lag effects of monetary flows (using the truistic monetary base, required reserves), have been mathematical constants for
> 100 years. I.e., the increase in the currency component of Friedman’s base, was contractionary.