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GDPNow Forecast for 2022 Q3 Barely Positive Following Housing Starts Report

The seemingly strong new residential construction report for August had a negative impact on the Atlanta Fed GDP forecast for the third quarter of 2022.
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GDPNow data from Atlanta Fed, chart by Mish.

GDPNow data from Atlanta Fed, chart by Mish.

Please consider the September 20 update to the GDPNow Forecast for Q3 GDP.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 0.3 percent on September 20, down from 0.5 percent on September 15. After this morning's housing starts report from the US Census Bureau, the nowcast of third-quarter residential investment growth decreased from -20.8 percent to -24.5 percent.

The up-down, up-down pattern of the GDPNow forecasts finally collapsed into a down-down-down pattern on weak jobs followed by weak retail sales followed by the new residential construction report.

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. 

RFS was positive in the second quarter and April had a big retail sales splurge in spending. 

Things fell apart in May and that's when I believe recession started. 

This is a good reason to ignore the talk of two quarters of declining GDP being a recession.

 Spotlight on Current Real Final Sales (RFS) Estimate

  • RFS Total: 0.9 Percent (Lead Chart)
  • RFS Domestic: -0.2 Percent
  • RFS Private Domestic: -0.6 Percent

The real final sales RFS Total is the bottom line estimate for the economy. The rest is inventory adjustment that nets to zero over time.

Note that government spending and exports (military exports?) are propping up the numbers.  

Real private sales to private domestic purchasers is negative 0.6 percent.

I repeat the comment I made on September 15: Quick, send more money to Ukraine and escalate student loan writeoffs to aid spending.

Housing Starts Unexpectedly Soar In August as Housing Permits Crash

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Housing Starts Single Family vs Multi-Family 2022-08

The driver for today's decline in GDPNow was today's residential construction report.

For discussion, please see Housing Starts Unexpectedly Soar In August as Housing Permits Crash

Housing starts were up a whopping 12.2 percent. I commented the data was much weaker than it looks, now confirmed by the GDPNow model.

Single Family vs Multi-Family Discussion

  • Single-family starts crashed in July from 1.013 million to 0.904 million.
  • That's a decline of 10.8 percent
  • For August, the single-family rebound was only 3.4 percent (±10.1 percent) above the negatively revised July figure of 904,000. 

The Long Slog

NAHB National Housing Market Index Declines for the 9th Consecutive Month

Yesterday, I noted NAHB National Housing Market Index Declines for the 9th Consecutive Month

The housing crash is certainly not over. And the trend towards weaker and weaker data overall is still intact. 

This post originated at MishTalk.Com

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