The Atlanta Fed GDPNow Model forecasts a number we all hope is wrong.
After this morning’s Advance Economic Indicators report from the U.S. Census Bureau and personal income and outlays release from the U.S. Bureau of Economic Analysis, the nowcast of second-quarter real personal consumption expenditures growth decreased from -43.3 percent to -56.5 percent and the nowcast of the contribution of change in real net exports to second-quarter real GDP growth decreased from 2.07 percentage points to 0.73 percentage points.
The New York Fed Nowcast estimate took a dive to -35.5% from -30.5%.
Annualized Numbers
Both numbers are seasonally-adjusted annualized quarterly-numbers so the estimate is awful, but not as bad as it looks.
Income Surges as Spending Drops Most on Record
The forecasts plunged due to a BEA report that showed Income Surges as Spending Drops Most on Record
Income and Outlays
- Income: +10.5%
- Disposable Personal Income: +12.9%
- Real Disposable Income: +13.4%
- Personal Consumption Expenditures: -13.6%
- Real Personal Consumption Expenditures: -13.2%
Amazing Leap in Savings Rate to Record 33 Percent
As a result an alleged rise in Disposable Personal Income of 12.9% and a drop of -13.6% in spending, the Personal Savings Rate jumped to 33.0%.In
In Why the Amazing Leap in Savings Rate to Record 33 Percent? I list eight reasons for the decline in spending.
There are also a couple of reasons that income may not have risen as much as reported. Please see the link for details.
Mish
Could the Fed vanquish the Treasury debt they purchased? I know that it’s easy technically – it’s literally an accounting entry. They print money using an accounting entry and they could forgive debt through an accounting entry. Could they legally do it? Perhaps we need a new law that allows a one-time writeoff only when our economy is shut down due to a global pandemic. Basically, our government owes itself money and it can forgive itself from paying itself back. Weird, I know but that’s actually what it is. This epic drop in GDP and income is unprecedented. Pumping up the money supply and forgiving government debt in and of itself won’t cause inflation. Desperate times. We only get inflation if our currency devalues and other governments would probably do the same if we did it. Crazy? Maybe? Possible? Maybe?
What we need are more tariffs!
Isn’t that bullish?
A lot of Americans, after a few months at home, have realized how much of their “necessary” spending is pointless and stupid. After a couple of months of working at home and having thousands of extra dollars in their accounts thanks to not having meals out, Starbucks, paying for overpriced and overtaxed poor quality transit with bankrupt pensions, etc., I doubt they’re going to go back to “spending as usual.”
With the shopping districts in many American cities now smashed up, burned down and looted, any motivation to go shopping for non-necessities will be further reduced.
We’re in a new era. Debt-fueled consumption is about to grind to a very visible halt.
Been saying the same shit to people all day.
After tonight I’d say it’s -54% now…
Trump would want the number to be as low as possible so he can claim victory for a HUGE increase in GDP numbers in Q3.
This should really get interesting when 40 million rents go unpaid.
Well, depends, the younger generation has an answer. Just get mad and burn the rental down.
I’m surprised it isnt higher. Shut everything but food and essentials down and what would one expect.
deflation? US food prices see historic jump and are likely to stay high:
Cool, that’ll cure the obesity epidemic.
Fat people always find a way to stay fat Mr. P. I know though that my weight at 6′ has dropped from 168 last month to 156 this morning. I have a doctor appointment and they are going to shit themselves when I get on the scale. In older people (I refuse to say geriatric) this usually leads to a diagnosis of Failure To Thrive.
Food inflation is coming and it is simply going to stun people. Those that say nonsense, food commodity prices do not support retail inflation, well let me tell you all something about commodity prices, they have not had ANY connection to retail prices in a number of years. Look at sugar, 10-12 cents on the global commodities markets yet $2.45 for a 4 pound bag in the stores. Please point out to me how there can be between 40 and 48 cents worth of sugar in that $2.45 bag unless the bag itself cost like $1.80. And I am not buying that there is that much overhead, distribution and handling cannot possibly be more than a nickel per.
Take care of yourself Herkie. That’s a lot of weight to lose. Eat pancakes!
I have been saying this since mid March. I was going to get some salmon or steelhead for dinner the other night so I went to Winn-Dixie because they have a better fish counter than Publix, the fish looked questionable and was $14.99 per pound.
Everything is higher. People pretend it is a temporary side effect of Covid but it is not. And they will run out of money to pay for it before prices will drop and even then we have seen farmers that are willing to plow food back into the ground.
There is no good way forward now. People are going to get hurt as never before.
“Egg prices also reached an all-time record of more than $3 a dozen in late March, but they have since fallen to less than $1 a dozen.” Interesting because from about early march till I moved to Florida in early April I saw not one egg for sale so how would they know the price of nonexistent food? The price, $1.19 was still on the rack where they would be if they had any to sell, but when I got to Florida there were eggs and those were $2.79, I left the store without eggs. In fact, some of the difference is regional but my grocery bill here in Florida is not quite double what I had been spending in Oregon last year.
Not just food either, I ran out of razors and went to buy some, those also have nearly doubled, I was so shocked at the price I just could not make my hand move to pick them up. Hell with it I will just let it grow as awful as my scraggly beard is. Jesus, it’s not like razors were reasonable to start with, they have gone up so much over the last few years it is a big part of why the beard is so much back in style. But woe to we who can’t grow a decent beard.
Oh and then there is gasoline. So Wall Street has got it’s collective shit together re fuel and energy eh? Meaning gas has shot up from $1.55 here to Just under $2, yesterday I had to pay $2.45 per gallon (but that was premium) and it is going to do what food is doing soon. They had to basically dump it when the market collapsed, I saw it as cheap as $1.299 in Texas during the move, but now that they have dumped most of the excess and found storage for the rest they will get production under control and go back to gouging us again. I expect the price of gas to nearly double by election day. 2020 is the year that we on a fixed income will start to seriously think of coming out of retirement because we can’t afford to live, but won’t be able to because of tens of millions of unemployed.
I have already had men come to my door begging for any kind of odd jobs and selling handyman services. It is really heartbreaking I have no money to pay them.
Majority of people I know have planted gardens and bought meat shares from local farmers. Many people I know bought egg laying hens. It’s nearly impossible to find a deep freezer. Restaurants are a huge source of food waste. With nobody going to restaurants this waste is eliminated.
This is all very deflationary for food.
I really don’t think so. I think the Wall Street melt up has a lot to do with it right now, see this:
2008: Food prices rose 6.4% according to the Consumer Price Index for food. It was the largest single-year increase since 1984. Commodity speculators caused higher food prices in 2008 and 2009. As the global financial crisis pummeled stock market prices, investors fled to the commodities markets. As a result, oil prices rose to a record of $145 a barrel in July.
Right now the stock market is managing to absorb most of the trillions in new liquidity, but stimulus money is out there, grants and loans are out there, EXTREMELY generous UI payments are out there, another round of stimulus is on the way, and farmers are plowing food back into the earth and euthanizing animals as the supply chain is disrupted. And not just disrupted from Covid, that was how it started, but now disrupted from all the unemployed people that USED to be part of that supply chain. Businesses in the chain that went away and are not coming back.
You may know some people with chickens, but 85% of Americans are URBAN and cannot have chickens nor would want to deal with the mess and feeding and noise. Not to mention vet bills to keep livestock and other farm animals healthy. All a freezer does is give a household a couple weeks buffer against food supply disruption, and right now there are a lot of things you cannot get, just try going to Best Buy and buying a new TV set or home sound system.
No matter, food in April took a historic one month jump. “US food prices see historic jump and are likely to stay high”
Posted May 30, 2020
So, don’t take it personally RSM but you are already wrong and food deflation is not going to happen. There may come a time when they come back down some closer to where they were 4th quarter of 2019, that might look they have started to deflate, but only relative to these astronomical increases now, they will still be YOY higher than last year which was higher than the year before which was higher than the year before that. I know, I watch my food budget VERY closely as I am on a fixed income and my COLAs don’t even begin to cover the increased cost of living, so I have to figure out new ways to lower my costs, because I cannot increase my income.
“deflation? US food prices see historic jump and are likely to stay high:”
…
I’ll take the under. Deflation on tap. The masses have little $$s … and will have even less when the stimulus payments drop / end.
Numike, I just noticed that guys name who is loading that refrigerator unit; Hardik
Usually do not make fun of names, but that really is special.
I also just noticed he is wearing open toed sandals, OSHA and their insurance company would have kittens.
I, for one, am exhausted from all this winning.
I prefer losing nowadays.
America has been nothing but running a non-stop victory parade since 1971. Running around and around and around, circling the drain, ever since.
All self inflicted.
Curiously, the net contribution for government spending was negative.
I had a conversation with Pat Higgins on that and will do a second post.
Does the Fed support count as government spending? Add in the trillions spent by the Fed back in and voila..the numbers arent that bad. It will only be a matter of time before someone in the administration pushes through a change to count credit by Fed as a contributor to government spending if it already isnt.
No
wikipedia:
“For the purpose of calculating gross domestic product (GDP), government spending does not include transfer payments, which are the reallocation of money from one party to another rather than expenditure on newly produced goods and services.[3]”
Government NET contribution was negative, and we know they spend a LOT to say the least, but this could mean that they also SOLD something that made the difference. But I have noticed at Debt To The Penny that there have been some wild flucuations in the debt, it is normally a fairly placid and steady rise with only a few fluctuations around the end of quarters and tax day.
I wonder if deferring the income tax deadline by 3 months had something to do with it.
OMG those are definitely depression-type numbers