I was pretty sure a miserable constriction spending would weigh on today’s GDPNow report, but nope. The forecast rose a bit with half of it on what I consider to be a very questionable ISM report.
Please consider the latest GDPNow Forecast for the third quarter of 2022, emphasis mine.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 2.7 percent on October 5, up from 2.3 percent on October 3. After recent releases from the US Census Bureau, the US Bureau of Economic Analysis, and the Institute for Supply Management, the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real gross private domestic investment growth increased from 0.7 percent and -4.1 percent, respectively, to 1.1 percent and -3.6 percent, respectively, while the nowcast of the contribution of net exports to third-quarter real GDP growth increased from 2.21 percentage points to 2.24 percentage points.
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.
Both the base GDPNow forecast and the RFS forecast is currently 2.7 percent.
If this is in the ballpark toss aside recession calls.
GDPNow vs Blue Chip Forecast
Understanding the GDPNow Strength
- US dollar exports account for most of the GDPNow forecast.
- Government spending accounts for all but 0.1 percentage points of the rest.
- Final sales to domestic purchasers is 0.5 percent.
- Final sales to private domestic purchasers is a mere 0.1 percent.
The Blue Chip forecast is lagging a bit timewise, but not that much. It will be interesting to watch this divergence over the next month.
For discussion of ISM services, please see ISM Services Remain Strong in August But Comments Tell a Different Story
For the divergence between ISM and the S&P please see ISM Services Remain Strong in August But Comments Tell a Different Story
Conflicting data is more than a bit confusing. Has the GDPNow model gone haywire?
This post originated at MishTalk.Com
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See: New Measures Used to Gauge Money supply WSJ 6/28/83. Neither William Barnett nor Paul Spindt, nor
the St. Louis Fed’s technical staff in 2008, …used accurate money flow metrics reflecting changes to AD.
Dr. Richard Anderson: “Although the evidence is mixed, the MSI (monetary services index),
overall suggest that monetary policy *WAS ACCOMMODATIVE* before the financial
crisis when judged in terms of liquidity;
All of these economists omit the most important, distributed lag effect
of money flows, volume times transactions’ velocity.
See: Fed Points
link to newyorkfed.org
“Following the introduction of NOW accounts nationally in 1981, however,
the relationship between M1 growth and measures of economic activity, such as
Gross Domestic Product, broke down.
resolve some of the confusion by isolating money intended for spending, from
the money held as savings. The distinction is important because only money that
is spent-so-called “true money” – influences prices and inflation”
We knew this already: In 1931 a
commission was established on Member Bank Reserve Requirements. The commission
completed their recommendations after a 7-year inquiry on Feb. 5, 1938. The
study was entitled:
its 2nd proposal: “Requirements against debits to deposits”
on March 23, 1983. By the time this paper was “declassified”, Nobel Laureate
Dr. Milton Friedman had declared RRs to be a “tax” [sic].
The FED is operating the economic engine in reverse. Interest
rate manipulation decreases R-gDp more than inflation. The proper course of
action is to drain the money stock and simultaneously drive the banks out of
the savings business (which doesn’t reduce the size of the payment’s system).
Contrary to Nobel Laureates Dr.
Milton Friedman 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.
Act. “while the aggregate of time and demand deposits continued to increase
after July, the proportion of time to demand deposits diminished. Whereas time
deposits were 105 percent of demand deposits in July, by the end of the year,
the proportion had fallen to 98 percent. These were all desirable
developments.”
exceed that # until 9/1/1967. Deposit rates of banks decreased from a high
range of 5 1/2 to a low range of 4 % (albeit not enough). A .75% interest rate
differential was given to the nonbanks.
Banks don’t lend deposits. Deposits are the result of lending. Ergo, all bank-held savings are frozen (causing secular stagnation). Rather than bottling up
existing savings, the monetary authorities should pursue every possible means
for promoting the orderly and continuous flow of monetary savings into real
investment.
“total checkable deposits”. But Powell deemphasized the role of money
in the economy. To coverup his ruse Powell eliminated reserve requirements and destroyed deposit
classifications. Powell eliminated the 6 withdrawal restrictions on savings
accounts, which isolated money intended for spending, from the money held as
savings. Powell thinks banks are intermediaries.
a direct relationship between the money supply and prices”.
to Nobel Laureates Dr. Milton Friedman 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.