by Mish

The November 23 high of 3.6% collapsed all the way to 2.4% yesterday, but thanks to construction spending is back up to 2.9% today.

Still, that’s quite a drop in eight days.

GDP Now: November 30

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2016 is 2.4 percent on November 30, down from 3.6 percent on November 23. The forecast of the combined contributions of real net exports and real inventory investment to fourth-quarter growth fell from 0.61 percentage points to 0.18 percentage points after last Friday’s advance economic indicators report from the U.S. Census Bureau. The forecast of fourth-quarter real consumer spending growth fell from 3.0 percent to 2.2 percent after this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis.

I missed capturing that snip yesterday. It’s from the Forex Live report Atlanta Fed GDPNow down to 2.4% from 3.6% on November 23.

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2016 is 2.9 percent on December 1, up from 2.4 percent on November 30. After this morning’s construction spending report from the U.S. Census Bureau, the forecasts of fourth-quarter real residential investment growth and real government spending growth increased from 7.1 percent to 12.4 percent and 0.1 to 0.6 percent, respectively. The forecast of real nonresidential structures investment growth fell from 1.4 percent to -3.4 percent after the same report. The forecasts of real consumer spending growth and real nonresidential equipment investment growth increased from 2.2 percent to 2.5 percent and 4.6 to 6.6 percent, respectively, after this morning’s Manufacturing ISM Report on Business from the Institute of Supply Management and the incorporation of earlier released November data in the model’s estimate of its dynamic economic activity factor. The factor is used to forecast yet-to-be released monthly source data for GDP.

Contributions to GDP

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Inventories

CIPI stands for forecast change in private inventories.

The model expects inventories will add 0.43 percentage points to growth, despite the fact that inventories are arguably way too high already.

Real Final Sales

If one subtracts inventory from the overall assessment, one arrives at an estimate of about 2.50% for real final sales.

FRBNY NOWCast

The Federal Reserve Bank of New York Nowcast report generally comes out on Fridays.

For the second consecutive month, GDPNow rose way higher than Nowcast then converged lower. On November 11, the Nowcast stood at 1.6% vs. 3.1% for GDPNow.

The Nowcast is 2.5% as of November 25. They now are in sync, but that is likely to change tomorrow following this week’s volatile numbers.

For my assessment of inventories, please see Automobile Sales Falling, Inventories Up 7.8%, Interest Rates Rising: What can possibly go wrong?

Mike “Mish” Shedlock

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