Today the BEA revised its second estimate of third-quarter GDP from 4.9 percent to 5.2 percent. GDI is 1.5 percent but it is a measure of the same thing. 
Chart Notes
- GDP and GDI are two measures of the same thing. DDP measures the value of products produced and income measures income from sales.
- The numbers are seasonally adjusted and annualized.
- Real means adjusted for inflation.
- The difference between Real GDP and Real Final Sales is a BEA estimate of CIPI, changes in private inventory. Inventory nets to zero over time so Real Final Sales is the bottom line estimate of GDP.
- The numbers should match and do correlate over time. But the difference between the measures is stunning.
Revisions to Third Quarter 2023 GDP
Instant Gratification
The discrepancy between GDP and GDI is ongoing and massive. That should bear attention. But it doesn’t and won’t.
People like the instant gratification that comes with the initial release of GDP. GDI is only released in later revisions.
All of the discussions today will be on the upward revision to GDP. But even among GDP watchers that’s not even the right focus.
Real Final Sales is the bottom-line estimate of GDP. RFS is a very strong 3.7 percent but far less than the headline 5.2 percent that media will be crowing over.
The Case for Recession
The case for recession has not been dismissed. The negative 3.0 percent decline in GDI followed by very weak increases of 0.5 percent in two consecutive quarters does not rule out recession if one believes as I do, that GDI is the better set of numbers.
At a minimum, as measured by GDI, the economy came very close to recession. Real Final Sales disagrees.
GDP/GDI Blend
The GDP/GDI blend is a stab at the BEA saying they do not know which set of numbers is correct. However, the Philadelphia Fed makes a strong case that GDI numbers are more believable.
The Philadelphia Fed does an alternate blend of GDP and GDI that they label GDPplus. I will do a follow-up post when the GDPplus numbers are released.
Key Take Away
Meanwhile, the key take away from this release is the economy likely is not humming the way media and Biden present.
Why Are Americans in Such a Rotten Mood? Biden Blames the Media
On November 17, I discussed the rotten mood of consumers. Polls show people do not think the economy is humming.
For discussion, please see Why Are Americans in Such a Rotten Mood? Biden Blames the Media
My explanation is certainly not the media, which no doubt will be crowing over these reports. Rather, it’s the price of rent and food.
CPI Rent
Rent of primary residence, the cost that best equates to the rent people pay, jumped 0.5 another percent in October.
For discussion of rent, please see Falling Rent is Extremely Rare, Yet Economists Keep Expecting That
Rent of primary residence has gone up at least 0.4 percent for 27 consecutive months!
People keep telling me rents are falling, I keep saying they aren’t (and the data proves it).
The Average Increase in the Price of Food Every Month for 32 Months is 0.6 Percent
Talk of a tame CPI report this month is entirely an energy mirage and easy year-over-year comparisons. Food is a particular case in point.
Please note The Average Increase in the Price of Food Every Month for 32 Months is 0.6 Percent
Is the economy great? For whom?
Real GDI is More Believable
Recall that “real” means inflation adjusted.
Incomes have been rising, that’s for sure. But how fast are incomes rising relative to inflation?
Could it be 1.5 percent is a much better number than 5.2 percent?
Based on GDI, a very reasonable case can be made that the economy went into recession and/or is still flirting with recession.
Nonetheless, expect a bunch of glowing comments today on how great this economy is.
I buy in fact only about 3 things, whatever it is, when I used to buy 4. Inflation has caused us to buy about 25% fewer things. Same cost. Fewer units. I know this is pretty typical. When is this going to show up in any statistics? GDP? up! Units sold? down.
=Units sold? down.
exacto munde!!
and cherry on top.
NOMINAL GDP IS summary of number of items (or service )* price sold.
if prices are %higher more than items sold %lesser qrt/qrt щr year/year,
NOMINAL GDP IS HIGHER!!
——
growth in nominal gdp is highest during times of hyper inflation (weimar, etc).
in 90x I lived in country where prices went 100 000 times during 10*15 years!
ps
guess the country. it is big,scary and cold!
= bea gdp gdi
all those figures are BS!
if mor$ons who produces them knew anything about real economy they would work for GS or morgan stanley killing in markets!
do you see famous software engineers working for gov? NO!!!!!!! they work for apple-amazon!!!
do you see famous brain surgeons working for gov? NO!!!
why is it different for economy-investing?
alx
=gdp gdi and gov stats
at the start of his prof. investing in 70х Mr Soros had a partner, dont remember his name., his is famous investor now , china bull , seeing him on tv often, etc
i remember many years ago read something he said (partner, not Soros!)
IF YOU RELY ON GOV STAS IN MAKING INVESTING DESIGIONS you choosen wrong profession.
alx
Divergence from what I hear and what I’m seeing.
Consumers have been facing a “widespread” rise in loan delinquencies since the Federal Reserve began jacking up interest rates last year, according to Ned Davis Research.
Credit-card delinquencies rose 21 basis points to almost 3% in the third quarter of this year, the highest level since the first quarter of 2012 (see chart), when looking at past due debt held by commercial banks.
Late credit-card payments have been a major driver of overall consumer-loan delinquencies, which increased to 2.53% in the third quarter, the highest rate since the first quarter of 2013.
Rising delinquencies come as outstanding credit-card debt has reached a record of about $1.2 trillion this year, and the rate of interest being charged also has touched a record of about 23%, according to Deutsche Bank Research.
Marketwatch
Massive Layoffs, 5 Upstate New York Supermarkets Suddenly Close
According to the WARN notice, 567 workers are impacted. It’s unclear why the stores closed weeks early.
Hudson Valley Post
Mish asked: “Is the economy great? For whom?”
Obvious answer: government bureaucrats, illegal immigrants and weapons manufacturers.
Separate related observation:
I got a phone call today from a recruiter desperate, and *desperate* isn’t a strong enough term, to get someone with more than 2-3yrs experience willing to commute into NYC.
NYC office space is barely 50% occupied (according to building security passes and MTA subway use). Even that overstates actual office use because that 50% is all CEOs (who commute via helicopter or armored limos) and fresh out of college kids. Are you sitting down? Turns out life in NYC is nothing like the TV show friends. Even if all six characters lived in one apartment, they couldn’t afford it. Statistically, one of them would be mugged every season, and a second would be mugged every other season. College grads are hoping to gain experience and on the job training from senior staff who are working from outside the city. No one is obligated to pay higher taxes, tolerate shitty public transit, and risk their personal safety — just because that might help some real estate investors, politicians and illegal immigrants.
DA Latitia James political attack against Trump is getting push back from Trump’s adversaries. Deutche Bank testified that everyone inflates their real estate appraisal estimates, both retail and business. Everyone. Now that buildings are half occupied, and CRE owners need to refinance, they are going to have to use “creative appraisals”. Far more creative than what Trump is accused of. In short, the political effort to “get Trump at all costs” is costing other real estate developers far more than Trump.
When (not if) NYC commercial real estate gets re-appraised – for bank loans or for property taxes – it is going to be much much lower. Setting a new legal precedent that borrowers may not give optimistic valuations under penalty of law is going to turn a disaster into a cataclysm.
NYC may be worse than other big cities because of DA James political attacks, but the reval of commercial property is going to crater GDP and GDI. Inventories has nothing to do with it
It’s funny. People anxiously wait for these economic numbers, then berate them if they don’t confirm what they expected, based on their beliefs. So they say the numbers MUST be manipulated.
Or, if the numbers DO confirm their pre-conceived notions, then the numbers must be real. Lol! What happened to all the manipulation?
Personally, I pay attention to a lot of economic numbers in aggregate, in order to get an idea of the major “trends” that are happening. I accept that most of these numbers are flawed, and merely represent best guesses. I never put my faith in any one number.
I like that Mish is using both GDP and GDI to gauge the economy. Two numbers are better than one. And together, they appear to show that the economy continues to grow slowly. Which is also what most of the other numbers seem to say as well. Which works for me.
Still being prudent though; selling into strength, locking in the gains, and raising a little more cash as each week goes by.
Love the opportunity this country provides to grow my wealth.
There’s got to be a better/more consistent way to measure economic output. Many reports are meaningless given the way they are stylized, seasonalized and revised.
This slight of hand has been going on for decades. Just like compound interest the hollowing out “Economy USA” and therefore GDP is much much lower than believed.
How can GDP always go up when cities are crumbling everywhere. Daniel Amerman explains this like zero other economists have
Hey MISH…link to danielamerman.com
This is where reporting needs to focus
Aww, no recession? But we came close?
My broken clock was wrong!
DBA blasting off oil up 1.91%
I do wish that there was an actual TV Show named, “Economy TV for REAL” or ETV or some-such Station that actually spoke about these bullshit estimates and revisions. MISH, you could star on that program in a Daily “Segment” going over the BS numbers and WHAT THEY MEAN and then reporting the revised Numbers to listener and viewers.
NOT GONNA HAPPEN, is my forecast.
I trust the eye test: Black Friday and post Black Friday traffic seemed VERY light. Granted much is done online but there were as many employees as customers in quite a few stores between Thursday and Cyber Monday from what I experienced. If we’ve learned nothing – the MSM and bureaucratic orgs are in full “on message” mode 24×7 so you can bet they will continue to full court press as long as they can. Remember they promote the sideline cash message, the peaceful protest message and a million other nothing-to-see-here messages. They can always give us the actual number on page 16 3 quarters hence.
In store Black Friday sales have lost their predictive ability – more and more is done on-line. On top of that, stores have Black Friday like sales all the time. There is really no incentive to rush out to buy on Black Friday anymore.
OMG
Is someone cheating?
If so, whom?
Is there any reasonable alternative explanation to this seeming impossibility?