Following dismal economic reports, the GDPnow model forecast is -42.8%.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2020 is -42.8 percent on May 15, down from -34.9 percent on May 8. After this week’s data releases from the U.S. Department of the Treasury’s Bureau of the Fiscal Service, the U.S. Bureau of Labor Statistics, the Federal Reserve Board of Governors, and the U.S. Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and real gross private domestic investment growth decreased from -33.9 percent and -62.8 percent, respectively, to -43.6 percent and -69.4 percent, respectively.
GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 beyond its impact on GDP source data and relevant economic reports that have already been released. It does not anticipate the impact of COVID-19 on forthcoming economic reports beyond the standard internal dynamics of the model.
It’s important to know this is an annualized number. The actual decline will be aout 1/4 of the headline number. Even still, expect a new record.
No V-Shaped Recovery
As noted earlier today Industrial Production Declines Most in 101 Years
And Retail Sales Plunge Way More Than Expected
Helicopter Drop
In response to the crumbling economy, the Fed is promoting a helicopter drop of money.
For details, please see Panic Sets In: Fed Promotes More Free Money
Mish
“In response to the crumbling economy, the Fed is promoting a helicopter drop of money”
The invisible tyrant of the world is the Fed, the arsonists who are masquerading as firefighters. Maybe we need a facebook group to bring them into the open and…
The economy is horrible and it won’t get much better when it “opens” because too many people (like me) are scared to go anywhere and most of us want to save some money to pad the bank account so we won’t be buying much. So I think you’re right Mish that this will go on for a very long time. I know the stock markets are stable to up because no one wants to fight the Fed, but it is weird. I don’t want to fight the Fed either. I learned during the Financial Crisis that the Fed will do anything to pump up asset prices.
How long is a “long time”? I work in a building with 13,000 people, 20 cases covid, no fatalities or even serious illnesses. Seems typical in my experience (not living in NYC). If everything opened up tomorrow, I’d probably look at my work place and figure, what the heck, why not go see a movie even if prudence says wearing a mask can’t hurt. I can’t afford to eat in restaurants anyway, who of the millions of hospitality and fast food workers can? True, alot of people in nursing homes have died but to be amorally frank, what difference does that make to the economy?
It might well be that the economy will bounce back fairly quickly. Just a guess, I sure could be wrong, I’m the first to admit it. But, given that the people out of work are mostly in the bottom tier, it seems to me that in a sense that’s not that big a deal: do they buy any new cars or houses or anything that’s not from Walmart? It’s callous to say it, but perhaps those poor people being out of work is not that big a deal, speaking of the economy in general.
“It might well be that the economy will bounce back fairly quickly.”
If by fairly quickly you mean at least 1 year, more likely 18 months, most probably yes. Why?
“It might well be that the economy will bounce back fairly quickly.”
…
I see this sentiment common. Of course, the ONE thing these folks all have in common – failure to mention massive debt overhang. At all.
Re: “given that the people out of work are mostly in the bottom tier, it seems to me that in a sense that’s not that big a deal: do they buy any new cars or houses or anything that’s not from Walmart? It’s callous to say it, but perhaps those poor people being out of work is not that big a deal, speaking of the economy in general.”
I think you have missed something important. In the recent retail report, spending by the bottom 20% is up from last year. With their stimulus check and their +$600/week of unemployment, they are flush with cash, and spending freely. the shortfall in consumer spending is coming from big drops in spending by small business owners, and people who are still employed, but who have seen drops in their income.
Speaking as a small business owner, it may be awhile before small business owners are feeling secure enough to spend on anything non-essential. Unfortunately my customer base is primarily upper income people and small businessmen. I am down 60% or so, and while it is growing slowly, I don’t expect to reach 80% of my former level for at least a year.
I don’t know what planet you live on but the wealthy and businesses have always made their money off the poor and middle classes, and when these groups stop spending money then it affects other businesses, it is all intertwined. Many white collar workers will be on the chopping block at the end of the year when corporations do their end of the year budgets.
Most people I know are saving their money and not spending right now, and the ones who are complaining the most are the one who lived beyond their means taking photos on their IG pages as if they were the Kardashians.
It appears we have entered the 4th turning……
The world economy was set to crater anyways. This Covid response is likely to push it into a depression. Helicopter money may be coming but I suspect we will all wish we were Preppers before this thing is over.
The numbers arent surprising given all economic activity was shutdown. The checkmark recovery is happening. We will look back on April as the bottom.
Too much money in the economy, and it has to go somewhere, so the stock market is where a lot of it ends up. It should be interesting to see how high the PEs go, though. 40? 60?
too much debt in the economy.
it has to go somewhere. that somewhere is “poof.”
My estimate is “#REF!” because there is no “E”.
PE……To Infinity, and beyond!
We’re in a secular bear market in my view, the correction will be over soon.
Good Point!!! Too Much money being pumped in the economy, but it is not really going to industries and people that are struggling. I still do see near great depression of unemployment, GDP and other effects to occur during the year. I believe were still early in this freefall.
Lessons From Slovakia—Where Leaders Wear Masks
The country’s politicians led by example, helping it flatten its curve.
And yet the DOW, S&P and NASDAQ are now all up for the day. Maybe I need to start drinking the Kool Aid.
me too
The totally “Corrupt Casino” nature of the stock market has never been better revealed than over the past couple weeks …
Interesting thing lately has been the stock market goes up, goes down, goes up, but OUNZ pretty much just goes up. There’s a message here somewhere…
Absolutely there is a message. Call it “Get Gold”. Everyone should have some exposure to gold in this environment as an insurance policy.
The barometric pressure, where I live, is up too….. It seems all kinds of unrelated numbers are….
Martin Armstrong predicts Dow 40,000. He’s very pessimistic but thinks money is going to stream into the US market from around the world.
Likely the nadir for Q2 estimates.
As country opens up in May and June the only way is UP.
Q2 will still be bad … just not THAT bad.
The tell will be how will H2 look? Put me down for flat line-ish growth as credit tightens + business folds.
How can the way be up? Seems to me conditions when everything ‘opens’ will be similar to when it all began a couple months ago, people will begin to be infected more and more and the system will be overloaded and it’s tatters all the way down.
If people keep not wearing facemasks in crowded areas we are gonna be right back to April in June
Look into the effectiveness of masks, saturation points, etc. They come with their own health compromises. False sense of security imo…
Certainly need the money to service debt in the absence of production…
The trick of it though…it has to actually be “free”…and not more debt obligations. And has to get to those that need it the most.
Best solution is a jubilee…but the monkey isn’t likely to let go of the rice in the coconut after spending a 100+ years getting to this point.
The “best” is no doubt to wait until Goldman Sachs and every bunch of Private Equity and other leeches on creation, have borrowed trillions upon unpayable trillions to buy everything worth buying, from people with less access to borrow. And then, conveniently, to have jubilee! Now, ain’t that brilliant…….
Instead, just do what has worked forever: Make bankruptcy fast, cheap, easily accessible, universal and final:
Debt gone. Everything it once helped acquire, firesold. All in a month’s work.
Of course, anything that sensible and reasonable, will, tah-dah, upend the privileges which have enabled the leeching classes to feed off the rest for the past century without producing a lick of anything worth vile in return. IOW, it will upend the “system” those same leeches can so reliably be counted on to screech crassly in favor of maintaining, at all and any cost whatsoever.
After all, it’s not their useless selves who are tasked with bearing that cost. They just want more debt to pump up their asset values so they can outbid productive people who have to work for their money. Then a jubilee, so they get to keep the stuff, but without the debt! Yeah, that’s it!
Jubilee’s have a way of self-reinforcing market equilibrium. Of course one would need to change the money creation aspect…preferably to direct government control (representation of the people as a collective – up to the people to keep it that way though and not allow money to take control of their representatives).
That said I’m all ears for potential solutions. I could give a rip about GS & the PE bunch. I’m thinking of the folks on the bottom struggling to pay bills in a system dependent upon new debt when they are at the bottom of the food chain burdened with decades and generations of debt that is impossible to repay (and to whom).
Bankruptcy or default accomplishes the same thing as a jubilee imo. Jubilee would hasten the defaults as folks tried to collect on debts prior to the jubilee date. Either way…
Amen and amen on sensible and reasonable.
“Bankruptcy or default accomplishes the same thing as a jubilee imo”
There is a very big difference between Trump having his debt wiped out while keeping Mar-a-Lago and half of New York; and Trump having his debt wiped out and living under a bridge. Such that other people, competent ones for a change, get to own Mar-a-Lago. While productive New Yorkers, all three of them, can afford to own their skyscrapers.
A jubilee is nothing more than 5 decades of letting thieves rob everyone blind, then just absolving everyone of all their sins, and letting the thieves keep all their loot blame free.
While bankruptcy, in addition to clearing the debt, also returns the stolen goods.
That’s why every functional society since the dawn of time, have had some forms of bankruptcy processes to deal with promises which can not be fulfilled.
There was a constraint there that you left out – changing the way in which we create new money and that new money is created by the people for the people (i.e. – representational government).
In your scenario above…Trump doesn’t end up being under the bridge because of ties to money creation. How do “competent” people gain control over assets?
At the heart of the question is – Who is the money owed to? And what was their investment or cost in the deal?
Is the Federal Reserve competent? They create the money…and at what cost? What is their real investment in all the assets in their expanding balance sheet???
How’s this for a plan for this/next pandemic: Protect the at-risk, quarantine the sick, herd immunity. We should have built separate nursing home facilities for the infected elderly and commissioned new covid treatment centers (standup hospitals) for others infected.
Why did we do this (40% drop in gdp) to ourselves? Was it Trump as President?
How do we retain our individual right to pursue happiness in the future? Should the government decide if we are at too high of a risk for coronavirus? Our Rights must not be contingent on passionate power-mad politician’s whims, pandemic scientist’s ‘curves’ or statistician’s calculators. If you don’t like it, help build safer shelter-in-place facilities for yourself and the vulnerable.
Our new guiding mantra from Fauci, Cuomo, et al: To each according to science, from each according to fear.
PS: the science was wrong. The r-naught was wrong. The CFR was wrong. Given Cuomo’s ‘ah-hah realization’ that 66% of new infections were sheltering at home, the stay-at-home orders in huge apartment buildings were also wrong. The curve was wrong. The reason to devastate the economy (flatten the curve to ensure adequate space to handle the sick) was never accurate. We have never been close to overwhelming our hospitals. Whoops! Sorry! Now at least one successful treatment is being held up (azithromycin, zinc, hcq. Trump derangement syndrome again?) In large measure, it appears the sick got covid through the air vents in apartment buildings, not at work. Note to you all, apartment buildings are not safe, home and work are safe. Who knew!?
Will we need a Pandemic Bill of Rights to put scared scientists back in the ‘advisor’ category, and not ‘in charge of our economy’ category? Will we choose politicians who fear the damage their power does more than the statistical ‘good’ they might do? I think we need government out of the business of making laws about individual risk, lest their ‘saving one life’ mantra theatens to burn the Constitution, and 40% of our GDP, to the ground again.
Question: Do you own your business? If it’s closed already, you know the answer. Since ownership of an asset is defined briefly as ‘the right to disposal’, I guess you still do own it. But that may be the only pandemic right to your business that you have retained.
I guess it’s all okay since a majority of your fellow citizens support the lockdown (until they lose their jobs too, or Trump loses his). Welcome to Pandemic Democracy, where your constitutional rights are determined by the media, a few pandemic doctors, and Facebook taking down all dissenting opinions in the name of safety. This ain’t yo’ Grandpa’s US of A, and I don’t like it one bit.
So-called “herd immunity” has been tossed around like crazy by people who don’t seem to realize that it’s not even known whether any long-term immunity to the virus will occur.
RE: “How do we retain our individual right to pursue happiness in the future?”
We prepare, we plan, we try to make sure we are ready for such occurrences that most people realized are real possibilities. We had done NONE of that…
Neither the science non the R0 were “wrong” because your false assumption is that you or anyone else knew what was “right”. And you still don’t … Besides R0 is not some “constant” associated with any contagious disease, it’s always a variable dependent upon a myriad of factors. Science can only calculate from available data, and as more and more data becomes available the calculations can change.
RE: “This ain’t yo’ Grandpa’s US of A, and I don’t like it one bit.”
funny … and revealing …
Herd Immunity is what we have been fighting for as far as ‘flatten the curve’ was concerned. Did you forget that? That specifically was the reason we were flattening (Trump’s economic) curve. Surely you would not be calling the people who came up with ‘flatten the (Trump economic) curve’ crazy? Would you? Oh, this is just about me. Actually, Herd Immunity is what most people think we do need to get to. You might review who is ‘crazy’ here. Eradicating the virus was NEVER in any plan, so Herd Immunity, treatment or (something we have never accompished before in history) a vaccine for a Coronavirus.
It is funny when a cabal of mad-scientists cause an unprecedented loss of jobs, wealth, mental stability, USA standing in the world economy, economic injection by the Fed, hunger in 3rd world countries, etc. Now THAT is funny.
RE: “Herd Immunity is what we have been fighting for as far as ‘flatten the curve’ was concerned.”
Wrong … flattening the curve was to keep from over-burdening the health care system.
RE: “Actually, Herd Immunity is what most people think we do need to get to.”
Fully agree … The problem is that nobody is currently sure whether it can be achieved because nobody is sure about how widespread in the population, how effective and for how long in any given individual, any immunity to the virus might be. All that is TBD …
RE: “Eradicating the virus was NEVER in any plan, so Herd Immunity, treatment or (something we have never accompished before in history) a vaccine for a Coronavirus.”
Again, fully agree … but none of those are sure things. Although I also agree with something in your original post that the HCQ/zinc/AZ treatment as soon as symptoms appear (not as last resort on the deathbed) or even HCQ prophylactically, is one of the current hopes despite whatever (IMO phony) bashing it’s received.
Whether you want to acknowledge the reality or not, the virus is the cause of the draconian response … doing nothing was not an option … lack of preparedness and politics as usual forced the much delayed response at which time the one-size-fits-all draconian response was the only sensible option.
So if by “cabal of mad-scientists cause” you are actually referring to the absolutely idiotic pursuit of “enhancement of function” research by a bunch of eminently fallible researchers in the Wuhan lab, I couldn’t agree more.
If you think that everyone should have kept pursuing the “no big deal … it will just go away like a miracle in a couple weeks” then I couldn’t disagree more.
I hate to belabor a point already won (namely that herd immunity is the point of the models), but I will for the sake of other readers who might be misinformed as to what the IHME and other models are showing you. Question: What would cause the number of new infected to approach zero in June/July? If that question is confusing, let’s discuss the options. 1. The IHME was presupposing that we had a vaccine in May/June. 2. People magically stop being affected by the Covid flu (never happened with the normal flu, and this flu is much more contagious), 3. the herd achieves immunity.
I don’t believe the models either, but that is the inescapable conclusion that they draw, as no one who built the models projected a vaccine in May/June.
In my opinion, this expansive shut-down of the US economy was performed by Trump-haters backed by scientists with variables on only one side of the equation (We shut down the economy, we save lives. No other considerations given). A good phrase describing such a scientist is a ‘fanatic’. I loosely called them ‘mad’ , but the ‘fanatic’ label may be more appropriate. These infection fanatics took no other effects of the shutdown into consideration.
Yes, herd immunity is what we were aiming at. Yes that is what the models are based on. No, they are not accurate predictors of this virus. No, we should not have listened solely to them or the ‘flatten the (Trump economic) curve’ preachers. Yes, there are other variables in the shutdown equation, and we should have learned more about the virus and its effects prior to taking such wild and non-targeted steps to protect the truly vulnerable.
RE: “What would cause the number of new infected to approach zero in June/July?”
Having the curve approach zero is NOT what is meant by “flattening the curve”. That term means to LOWER THE PEAK to a manageable level by spreading out the curve over time so as not to over-burden the healthcare system at a point along the timeline of the curve.
I am amazed at your confidence in your own lack of understanding.
I’ll ask this carefully. Why do the models approach zero? Why does the IHME model approach zero for new infections? Please focus.
I never said anything about flattening the curve having anything to do with approaching (or not approaching) zero. Both the flattened version and the unflattened model both approach zero. Why is that?
Here is your original statement verbatim: “Herd Immunity is what we have been fighting for as far as ‘flatten the curve’ was concerned.”
So in fact, your current statement: “I never said anything about flattening the curve having anything to do with approaching (or not approaching) zero.” is FALSE because …
Your original statement related “Herd Immunity” (which is the theoretical reason the model curve eventually approaches zero) to “flatten the curve” which has absolutely nothing to do with that but rather has to do with the lowering of the peak of the curve and spreading out the overall curve over the timeline.
Q.E.D.
That’s all folks …