Real Final Sales at 2.3 percent is the number to watch. 
The quarter is over half over but data lags so badly that we have less than a month to chart.
I started my third quarter chart today. The next GDPNow report is on August 26.
Key Numbers
- Baseline GDP Nowcast: 4.0 percent down from an amazing 6.2 percent.
- Real Final Sales: 2.3 percent down from 4.2 percent
- Real Final Private Domestic Sales: 2.7 percent down from 5.0 percent.
Evolution of 2026 Q3 vs Blue Chip Consensus
The initial reports are often wild, as was the case here. I seldom discuss the initial numbers and did not comment on the 6.2 percent Nowcast.
With GDPNow at 6.2 percent, the Blue Chip consensus was roughly 2.2 percent.
The Number to Watch
Real final sales is the bottom-line estimate of the economy.
The difference between the base forecast and real final sales is Change in Private Inventories (CIPI) that nets to zero over time.
Contributions GDP
CIPI is the largest contribution to the nowcast at 1.73 percentage points.
Unfortunately, there is no clean way to extract all of the AI-related components but we can see nonresidential equipment at 0.40 PP and Intellectual Property ay 0.38 PP.
How Much Did AI Spending Contribute to Second-Quarter 2026 GDP?
On July 31, I addressed the question How Much Did AI Spending Contribute to Second-Quarter 2026 GDP?
Five charts show the AI impact for every quarter starting 2025 Q1.
AI-Related Percent of Change in Real Private Fixed Investment
- 2025 Q1: 123.06 percent
- 2025 Q2: 124.74 percent
- 2025 Q3: 121.22 percent
- 2025 Q4: 357.48 percent
- 2026 Q1: 126.40 percent
- 2026 Q2: 68.81 percent
Click for more details.
This economy is extremely unbalanced.
Taconomics has proven consistent as almost all economic indicators have been moving in the same direction.
No, I don’t believe it is unbalanced.
That implies an equilibrium is somehow accessible.
I believe the US Government and economy are unhinged.
Vt with some square root thing.
A worthwhile article at unz regarding : “Donald Trump, Iran, Nuclear Warfare, and Biological Warfare”
IIRC I can’t post the link here without the platform blocking the comment. (The system likely allows the blog owner to post the link.)
Sooooo, I suggested that I’d give a review of the farm country Sunday Social.
It has definitely changed from the ‘Trump worship hour” to some consternation and about 40% of the people downright unhappy with Trump. Absolutely the most questioning of his policies and his support of farmers and workers in general.
One of the die-hards has flipped and is getting chided for his former support. 8 months ago anyone critical of Trump would have been laughed at and shunned.
I only ask questions and avoid taking positions as I do not want to be socially rejected in the community. Fuel prices are where I get to say that I bought my fuel forward because of Trump. I say that I did not expect diesel to get this expensive but I’m glad I bought it forward. Few of my farming peers bought their fuel forward this year because they thought Trump was going to get prices lower. They are paying dearly for their input prices now…
So I’d say that the Trump cult would win my local election, but It would be far closer than last year.
Farmers really have a hard time admitting they are/were wrong…
No matter how much pain they are feeling, they will still vote ‘R’ in November.
Everyone has a hard time admitting they were wrong. You have to own it and thats a bitter pill.
Even if they dump trump. They will still vote for a republican. And that is the same thing seeing how republicans vote( more than dems). as a unit. Imo it comes from the top. Those people the republican party actually represents. Ultra wealthy who decide who runs and supports them money wise.
They might just stay home, or find something better to do.
They might also skip this year’s contribution to the Republican Party.
Lack of enthusiasm on the R side is gonna bite them hard this November
“I only ask questions and avoid taking positions as I do not want to be socially rejected in the community.”
You have amazing courage.
I wouldn’t want to deal with those idiots either which is why I left. I’ll be back when most of them die off assuming there is still a country to return to by then.
like all empires, underneath them, is a country. as this empire is tumbling fast and abandoning our most prized department of war bases in richest part of world…………..the future looks much brighter depending on one’s state of residency. and more importantly, usually, one’s county and town. i bet a few pals in 2018 after a year of trump this empire will bust up by jan 20, 2029. a decade long bet. i made my pals bet to the date of crowning of the new queen or king. that’s when the dumbfuck peasants get all riled up. i was prescient about jan 6th. bottom line, the future here where i live is gonna be wonderful without the yoke of department of war and the red states welfare payments……….and their idiotic jesus freak anti freedom cult of nitwits. i’ve lived in the dumbest states like SC and the smartest places in our empire, the bay area and nyc. all empires crumble. but underneath them are a country and individual states that survive and chug along. the history books are filled with examples……….from spanish and french and USSR empires…………not too long ago. you are very smart MPO. i wish you well. you will make a killing picking off the choice meat back state side. whether you live here or not. good luck old sport.
Well, in 1970, Andrei Amalrik published “Will The Soviet Union Survive Until 1984?”
Amalrik was almost universally dismissed as a crackpot, especially by the Eagle Flag Freedom set and the professional anticommunists (both of which needed a scary and all-menacing enemy, not a tottering and mismanaged system riven with ethnic conflicts about to collapse from its own inertia).
Amalrik was off by a only few years.
For that matter, if you told the average frustrated Russian peasant in 1903 that in 15 years, Russia would fight and lose two wars (one to Japan!) and undergo two or three revolutions (depending on who counts), after which there would not longer be a Tsar in St. Petersburg, or even a Russian Tsar at all, he would conclude that you were possessed by an unclean spirit.
It’s not just peasants – if you told the average frustrated London banker, he would pronounce you quite mad and perhaps even not altogether our sort.
But here we are.
aye aye. i was in russia in the 90s doing business. wild time to be alive.
You prob won’t be back, because the std of living will be lower than what you are used to.
He has a lot of money.
People with money won’t notice any difference in their standard of living.
it’s a rich world cult of welfare queens, old sport. nothing less.
I suspect most of these recent economic reports have been massaged to give the impression inflation is falling (at least faster than it might be). I suspect this is to give Warsh a basis for not raising rates. I expect the numbers to spring back up after the Sept Fed meeting.
I suppose 60 months of failing to reach the 2% target is not enough of a reason to hike.
You say massaged, I say fabricated.
Isn’t it the debt that Trump promised would fall?
Oops another lie…
You have to give him credit for disguising 2025 tariffs as 2026 corporate welfare.
Everything is unbalanced these days, the economy is just one of sector.
Ham-handed impulsive interventions in markets and deals can only have that effect.
Imagine Trump’s diaper when he saw 6.2%.
Trump is transactional. Good, bad, indifferent he doesn’t care as long long as he profits.
meanwhile: AI Hyperscalers have pre-ordered almost all of 2027’s global RAM supply, increasing prices by 500%, and leaving almost none for smartphone & PC manufacturers. https://www.tomshardware.com/pc-components/ram/memory-prices-climb-500-percent-in-12-months-up-to-10x-the-lowest-ever-tracked-prices-128gb-of-ddr5-now-usd3-399
Credit markets, environment, everything is being heavily taxed and leveraged for this Moby Dick pursuit.
One unknown is the AI build-out. Some concerns that we are building more than we need and that AI can exist in a much smaller footprint. I suspect if that is true, the economy will really slow. Other thoughts the threat to jobs will come but it is still a work in progress AI can do jobs really fast, but then they need to be edited by humans to fine-tune. So yes savings, but not the massive change predicted yet.
So much money thrown so hard and fast up front at a field with such fast evolution can easily be wrong-footed. I’m sure Musk will keep coming up with cosmic-scale dislocating dream cartoon projects. Like Trump, there have been ever-new legions of suckers for that kind of pitch, so far. Will there be an industry of reconstituting farmland and human-scale infrastructure and life? There are plenty of cities which have already departed that measure of things.
The data center boom is about to go bust. New methods for AI are already coming out that use far less computing power. Lots of people will be bagholders.
https://www.youtube.com/watch?v=4S8I22ybG2c
This is why big companies are desperately trying to get people against open weighted LLMs. They need to own the concept of air so they can sell it to suckers.
Wonder whether Jevon’s Paradox will make them more valuable, as the ROI of “getting more useful output out of the same electrons” increases.
As someone involved in the C level of a company riding the AI wave, it’s more outright stupid than unbalanced. Businesses have no clue how AI works and you have plenty of Jojo types who are dim enough bulbs to sign huge contracts for stuff they don’t understand. The latter is a big part of the “boom” because many companies in my sector don’t plan on delivering squat, they’ll take the money and deliver an interactive toy with zero economic value.
This entire crisis is the result of decision makers being largely tech illiterate as a whole. It is exceedingly easy to sell someone what they want to hear when you have AI, which is exceedingly good at showing people exactly what they want to see with no depth. Depth doesn’t matter when you’re selling stuff to people who don’t understand what the blinking lights mean though, so by the time they realize it isn’t working they’ve blown through reams of cash and publicly invested too much to admit they screwed up. In turn you have a cycle where companies massively over invest but never admit they did so in order not to scare shareholders.
It is in essence the perfect storm for creating an economic mirage.
There is going to be a big shake-out of AI companies in the near future. The ones left standing will thrive. Don’t discount the Chinese firms such as DeepSeek, Baidu, Alibba, Moonshot, etc.
I have bought some ETFs that have some holdings in Chinese AI and robotics.
That is subject to some political risk. Trump is soft-pedaling on China despite its being a lifeline for Iran. But he has displayed few qualms about dealing with embedded contradictions, as in coddling crypto operators who have facilitated money laundering and terrorist financing, as long as he perceives some benefit to his interests.
I expect the Chinese to end up better off because they don’t allow blatant scams to rip people off. America on the other hand has decided that customers big and small should have no protections at all from people selling snake oil. I don’t see that working out well.
To add on to this: it’s not AI as a technology that’s the problem. It’s people overselling what it can do knowing full well it can’t really deliver. Allowing them to do this has turned the public against the technology in a major way that will likely hamper western adoption in the future since everyone will associate them with laziness and fraud.
Yes the US has an overabundance of charlatans, but Chinese households lost up to $18 trillion in the real estate bust.
https://www.reuters.com/world/china/chinas-property-crisis-grinds-after-evergrande-sentencing-2026-08-23/
Trump’s destruction of the economy is just a small part of his evil. This is one of the top ten worst human beings of all time
Top ten… I’ll have to think about that. There’s some stiff competition when you say “of all time”. Although, I’m having difficulty coming to with 10 names that best him.
Of course we don’t know how many were raped and tortured at the various Epstein estates.
Top ten? You need a serious history lesson.
That’s exactly what GDPNOW does. A fifth grader could do a better job than them.
Forecasts follow the same patterns as when Biden had the office
Perhaps he retained the same team of Civil Servants