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
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
The longer the sideways slog, the longer and weaker GDP will be.
Housing and related durable goods purchases tends to lead recessions and recoveries.
Expect a Long Period of Weak Growth, Whether or Not It’s Labeled Recessionhttps://t.co/w3m0qNUeGx
— Mike “Mish” Shedlock (@MishGEA) September 20, 2022
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
Please Subscribe!
Like these reports? I hope so, and if you do, please Subscribe to MishTalk Email Alerts.
Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.
If you have subscribed and do not get email alerts, please check your spam folder.
Mish
