Another blast of imports and a poor spending report impacted the Nowcast.
Pat Higgins at GDPNow has made official adjustments to its model to account for gold imports.
The base model doesn’t adjust for gold imports/exports but the BEA does.
Gold bars and bullion are considered financial assets and gold imports have soared along with other imports, front-running tariffs.
For discussion, please see my March 27, 2025 GDPNow Discussion.
What Now?
Two reports caused the decline from March 26 to March 28.
There was another blast of imports on March 27 in the Census import-export data, and today the BEA reported personal income and spending.
The Nowcast does not attribute changes to specific report, but I take a crack at that below.
Contribution Changes
- PCE Goods: From -0.13 to -0.39 BEA (Net -0.28 PP)
- PCE Services: From 0.43 to 0.59 BEA (Net +0.16 PP)
- Change in Net Exports: From -3.95 to -4.79 Census (Net -0.84 PP)
- Fixed Investment: From 0.91 to 1.06 Census (Net +0.15)
- Total above: -0.81 Percentage Points
There were other minor changes taking the NowCast down by 0.7 PP.
The report shows Change in Private Inventories (CIPI) went from 0.60 to 0.41.
The difference between the Nowcast an Real final sales is CIPI which nets to zero over time.
This is why RFS only declined by 0.5 PP from -0.4 percent to -0.9 percent while the Nowcast fared worse, declining by 0.7 PP from +0.2 percent to -0.7 percent.
The number that matters is Real Final Sales, now -0.9 percent.
Related Posts
March 27, 2025: Second Massive Wave of Imports Shows More Tariff Front Running
The advance import-export data for February is another doozie. Three charts.
March 28, 2025: Real Disposable Personal Income Up 0.5%, Real Spending Up 0.1% in February
Consumers seem to be hunkering down in February as income outpaces spending.
Both reports were negative to GDPNow.
What’s the investment plan as a result of all the information? Buy gold? Short stocks? Buy stocks? Buy the vix? What’s the timeframe of the trade? Is the trade already over? Mish leaves it mostly up to us to decide what to do.
Mish makes money, I think, by people reading the articles and ads and clicking etc, not necessarily by his timing or advice being all that great. The information and thoughts are helpful and informative. He has better vision than me and more information than me. I wish Mish would be a little more specific about what exactly he recommends to do to make money and survive though. Of course there may be limiting rules for anyone that might offer investment advice.
Having vision and making money are two different things. I think some subscribers would appreciate more what you are doing try to make money, not just the facts and problems we are confronting. The risk is the advice doesn’t pan out.
Why, winning happened, silly!
😂
The Plot Against AmericaHow a Dangerous Ideology Born From the Libertarian Movement Stands Ready to Seize Americahttps://www.notesfromthecircus.com/p/the-plot-against-america
This results in a double-bind for the Fed (FOMC schizophrenia: Do I stop because inflation is increasing? Or do I go because R-gDp is falling? …causing stagflation?). If it pursues a rather restrictive monetary policy, e.g., QT, interest rates tend to rise.
This places a damper on the creation of new money but, paradoxically drives existing money (savings) out of circulation into frozen deposits (un-used and un-spent, lost to both consumption and investment). In a twinkling, the economy begins to suffer.
The solution is, as Dr. Scott Sumner says: to target N-gDp?
“The individual banker thinks of his banking operations as being of an intermediary nature. He sees his bank as standing between savers and borrowers, transmitting to worth borrowers the savings of the bank’s customers. There is nothing in the individual banker’s experience to dispel the illusion that he is operating an intermediary type of financial institutions. And it is for this reason that bankers and their associations have been, and are, such vigorous proponents of time deposit banking”
And there is a one-to-one relationship between time and demand deposits. An increase in time deposits, depletes demand deposits $ for $.
Savings flowing through the non-banks never leaves the payment’s system. The primary way to reduce the volume of bank deposits is for the saver-holder to use his funds for the payment of a bank loan, interest on a bank loan for the payment of a banks service, or for the purchase from their banks of any type of commercial bank security obligation, e.g., bank stocks, debentures, etc.
All savings originate within the payment’s system. Saver-holders never transfer their savings outside the system unless they hoard currency or convert to another national currency.
The only way to “activate” said savings is for the owner to invest/spend directly or indirectly, e.g., via a non-bank conduit.
Thus, all DFI held savings are lost to both consumption and investment, indeed to any type of payment or expenditure.
The DFIs always create new money whenever they lend/invest with the non-bank public somewhere in the payment’s system. The DFIs do not loan out existing deposits, saved or otherwise.
Savings that are transferred through a non-bank conduit never leave the payment’s system. There is just a change in the ownership of existing bank deposits when borrowers are matched with savers, viz., a velocity relationship.
Where the public saves or dis-saves, chooses to hold their savings in the commercial banks or to transfer them to non-banks will not, per se, alter the total assets or liabilities of the commercial banks nor alter the forms of these assets and liabilities.
Bottom line, unless the DFIs are driven out of the savings business, saver holders will experience lower *real* rates of interest –both within and outside of the payments system, the financial suppression of interest rates.
The U.S. Golden Era in Capitalism ended when TDs began to exceed DDs.
A dose of reality in addition to the market adjusting to lower AND more realistic valuations,
US Automotive Tariffsthe pertinent data https://www.visor.vin/tariffs
Looking forward to Trump’s “Liberation Day” tariff announcements! Though with markets dropping, Trump may soften his coming tariff announcements.
He was already talking nice about Canada and Prime Minister Carney after their phone call today. What a turnaround! Maybe with Trudeau gone, he doesn’t hate Canada now.
Though with all the tariff uncertainty, it will difficult to avoid a US recession this year.
Yep.. Carney is such a fan of Trump😂so is Canada. So is Europe…our longest lasting allies. American conservatives have lost their tiny little narrow minds.
Yes. Too late to appease the average Canadian or European. They are already too pissed off at Trump and Musk. Their anti-American attitude will affect their purchase and travel plans for years to come. Which is another reason to expect a US recession.
Avoid? With 1/4 of the federal outlay being deficit spending a recession has been masked quite well in recent years.
As for tariff uncertainty, the only certain thing is tariffs won’t be implemented with the terms threatened.
Deficit? You must be referring to the 1.6 trillion per year in Trump tax cuts since 2017.
And exactly what do you mean by “tariffs won’t be implemented with the terms threatened”? How do you know this, and what will the terms actually be? Are you privy to some inside info?
Not specifically those tax cuts, deficit spending in general. The deficit spending as a non-trivial portion of the budget predates your friend Donny and the projections 5-10 years past the end of the Obama administration weren’t rosy to begin with, but low interest rates minimizing interest payments helped keep the music playing.
What I mean is exactly what I typed. I surely don’t have specifics as to what will really be implemented (and it is reasonable to presume that no one knows as of right now, not even the head of state). In case you haven’t paid attention, there has been a pattern of past tariff rollouts varying in scope, amount, or start date from what the headlines say will happen when they are first announced.
Government employees are nervously tightening their belts. Remember a government employee is an economic cost or rarely an investment and not a contributor to GNP. The more government employees who join the work force the better. DOGE has cut a lot of grift to NGO’s as well.
There’s a multiplier effect that you just don’t get. But..you do you on private employers. The rage and jealousy conservatives have for government employees is very interesting. Childish jealousy..but that’s the conservative swan song.
I have been a government employee. As a lieutenant I sat a sinecure for two years and did nothing but save my life and limb from combat. I was ever so happy to return to productive useful work as a free man. Very few government employees contribute. I count President Trump,DOGE, and four seats on the Supreme Court among the contributors.
It is not a simple binary, and only fools continuously reduce it to that. Gov outputs: Internet, highways, commercial aviation, microchips. But also intangible: social peace, public health, public education. Try being in Russia in 1917 to find out what the absence of those things is like. It goes very zero-sum. It devours its own big-mouths, and feeds them to a wood-chipper too. Things go very predatory, as they are comparatively more “mildly” here in the USA now, so far. But predatory is the new normal for the upper echelons of MAGA, and it trickles down, and distributes across. The lack of protection for the small opens a space for the predators to feed on them, a competitive space that must be filled with new predation. Only alpha predators are left at the end, then they go after each other. Europe 1945, coming to a homeland near you. Have fun.
Most of us agree that government has necessity and some virtue. The question is how much is too much government and where the virtue ends. For example public education in Chicago cannot teach children how to read or how to speak English. A government that runs up >30 $trillion debt is too much government.
Is your name Kendall Georgiana Barret? Is it Keith Geoffrey Bottoms? Is it Kimberly Gabriel Bailey? Is it Kyle Garret Blake? I’m tired, is it KGB? Why yes it is…Komitet Gosudarstvennoy Bezopasnosti. Hello Comrade! But, if your name is some version of the above… I do apologize. Comrade…you are a special kind of Russian troll aren’t you?
Close but no cigar.
Those with long dated gold futures will need to have physical gold on hand to satisfy the contract on the delivery date. These contracts were written before tariffs came into play, so importing gold is a tax / loss avoidance strategy by the party that wrote a contract.
Will physical gold deliveries be made outside the U.S. to avoid tariffs?
Couldn’t figure out why the mining index did not rally today with the metal. Some of these dislocations are not making sense…
Note to Midnight. I failed to mention my -1.4% was Real Final Sales
His was +1.4 I believe nominal.
Its possible but extremely unlikely we could both be correct.