Two Atlanta Fed GDPNow measures took a 0.8 percentage point dive on May 31. Let’s go over why.
Please consider the May 31, 2024 GDPnow Forecast for second quarter GDP.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 2.7 percent on May 31, down from 3.5 percent on May 24. After recent releases from the US Census Bureau and the US Bureau of Economic Analysis, a decrease in the nowcast of second-quarter real personal consumption expenditures growth from 3.4 percent to 2.6 percent was partly offset by an increase in the nowcast of second-quarter real gross private domestic investment growth from 5.1 percent to 6.3 percent, while the nowcast of the contribution of the change in real net exports to second-quarter real GDP growth decreased from -0.06 percentage points to -0.60 percentage points.
The important number in the above chart is the Real Final Sales forecast.
The difference between the base forecast and RFS is inventory adjustment that nets to zero over time.
RFS is the bottom lines estimate of the economy.
“This Rates to Smack GDPNow”
Sommers made a reference the trade deficit which increased by 7.7 percent in April. I looked up the numbers. The trade data wasn’t “fairly awful” it was downright awful.
Advance Indicators
I took one look at the numbers and stated “This Rates to Smack GDPNow”.
My statement may seem obvious, but it’s not. The report itself is irrelevant. What matters is what the report does vs what the model predicted it would.
Sometimes bad data causes the GDPnow forecast to rise. I made my call based on a spot assessment that that the model would not have expected such an awful number.
Weakening Data All Over the Place
Data is weakening left and right. I believe we are headed for recession this year, but we are not there yet.
For discussion, please see Philadelphia Fed GDPplus Revised Significantly Lower, But No Recession Yet
I think Drudge had a tag today saying the US dollar is as strong as the 1980s? Yikes. I just came back from Turkey, bought $300 in Lira, it was $10,000 in Lira. I was glad I didn’t buy my usual $1000 dollars in the states coin, I’d need a suitcase to carry that much cash, its 30 to one! They want dollars and euros, no Lira. How can the dollar be so strong? Well there is a fixer for the election, or the other countries are slamming the US and they sill want dollars. Amazing stuff.
I’m sure Mish has a reason for referencing the GDPNow report and I’d like to know what it is. He’s forever criticizing the FED for using failed theories but keeps referring to this “forecast” which like a politician, changes it’s view at every change in the wind.
Our debt-based monetary system REQUIRES trade deficits in order to maintain the US Dollar as the world’s reserve currency. See Triffin Dilemma.
The dollars created by the fed need to be quickly exported to keep some kind of control over domestic inflation. A trade deficit solves this problem while having numerous other benefits to the system.
Cheaper goods imported from overseas maintain an illusory standard of living AND boost corporate profits of those US corporations that have offshored their production.
Any dollars that make it back into the US are used to purchase financial assets and real estate giving another illusion of prosperity.
Those repatriated dollars that buy US Treasuries keep interest rates lower than they would be otherwise and allow the US government to avoid unpopular taxes.
Don’t you just love it when a plan comes together like this?
Surprised this is getting more downvotes than up. I would ask on the 2nd to last sentence those repatriated dollars are mostly owned by foreigners and isnt that why foreigners own alot more of American assets? Land? Stocks/ real estate especially?? At some tipping point how is that a good thing?
What is driving this soaring trade deficit ? What are we exporting less or importing more ?
What are the top three trade categories that are behind this ? Is it oil as we are less oil independent ? Is it electronics from the Chicoms ?
Are we exporting less agriculture products to Asia ?
Rehearsal for late on election night in Atlanta-
https://m.youtube.com/watch?v=SK5QEmFNwoM
IOW, their model will never produce any “bad news”, no matter what the inputs might be.
What a neat trick. Wish I had one of those models @ my business… shovel shit into the magic model & harvest roses at the other end.
GDP NOW is a complete joke. The data is totally worthless. End the FED starting with the ATL branch.
Sounds like the climate models. Except in the climate models, it’s ALWAYS bad.
Seems consistent with the facts of a slowing economy. We are at stall speed. The Fed shouldn’t give in or cave. Let the economy find its true equilibrium. People can save and get a good return instead of continually going into debt.
They are saving, but in Bitcoin
https://oilprice.com/Energy/Energy-General/Is-a-Tipping-Point-Approaching-for-Americas-Most-Prolific-Oil-Basin.html
Just wait till USA starts to become oil import dependent again.
Think pooty putin isn’t watching?
Increasing GOR (gas to oil ratio) means your wells are changing from oil to natural gas.
That’s not good if you want oil and not negatively priced natural gas.
interesting Mr. Giant, especially since I prefer to see the trees for the forest instead of the forest for the trees. Keep it coming if you’ve got more trees that should be looked at.
I like to deal with reality. Don’t care about trees and forests other than they are beautiful!.
And lieing to yourself that you are oil independent so that a few fat cats (Harold Hamm, Pioneer, etc) can get rich does nothing for me.
50% annualised decline rates are empirical. They have only gone unnoticed because of new hamster wheel tier 1 sites. Those are running out.
Putin miscalculated Ukrainian resolve. But he did it because he is a super power energy exporter and knows his advesaries will soon need him.
Looting the rest of the world with abandon – while we still can.
Somebody looted the treasury in 2020 and onward. The best way to stop a virus is by drowning it in money. Doctors know this. It’s covered in med school coursework. I was able to cure my herpes outbreaks by rubbing 100 dollar bills on my sores. It really does work. I could be wrong though, maybe it’s really the magnetic strip in the bill that was doing the magic. I don’t have it all figured out though. I’m planning on doing some comparative experiments next time I have an outbreak. I will rub my debit card all over the sores and see how that compares to rubbing my credit card down there. Cash might be more antiviral than credit. I’m not a doctor though so maybe they know better. I recommend laundering your money after treatment if you are planning on using it at the grocery store though, because that’s just gross. We need to have standards with how we use our money and not spend it when it’s dirty, but some will.
One should celebrate this growing trade deficit because it increases the strength of the PETRODOLLAR !!!!!!!
The energy sources and supplies are diversifying outside of US control for the last decade or more which is a big contributor to the economic hit operation that was initiated under the guise of the pandemic circus show. The US tried to maintain control and it has delayed things but hasn’t stopped the decline of the petro-dollar monopoly. Seizing oil tankers of Iran and Venezuela, attempting the overthrow of the governments of Iran and Venezuela, blowing up Libya and putting it’s oil production out of commission, enacting sanctions on oil producers, the Bank of England attempting to steal the physical gold stores of Venezuela, the tariffs on solar panels from China, the stealing of oil from Syria and Iraq under the cover of the CIA’s Operation Timber Sycamore (ISIS) and shipping the oil through NATO ally Turkey, the manipulation of oil pipeline politics bringing tar-sands oil out of Canada, the continued subjugation of Mexico to control Pemex, the multi-level targeting of Russia’s oil and gas industries and trade…………..have had great impacts but haven’t reversed to course of the decline of the Petro Dollar.
If all else fails, a larger scale war that destroys the energy infrastructure of competing countries is one final resort, but those countries have been paying attention and preparing and have upped their game and defenses, making it harder for the US military to wield a free hand in global destruction as easily as in the past. As the colonial cabal of the former East Indiea company (represented by the countries that fly flags of the colors of that corporation) go further into decline due to being beat at their own game that they set their own rules, expect things to get weirder, such as a strong reversion to the old reliable money maker of drug dealing (opium, opiates, fentanyl, war in afghanistan supplying europe and the US). If selling drugs to our own citizens and europeans to funnel money back into our financial system through cooperative drug cartels (Sinaloa Cartel, Italian Mafia, Turkish traders) is alone not going to be enough to keep this circus running, what else is there?
Here is the real deal. The Petro Dollar is dying and without that scheme having long enough legs to stand on anymore, it won’t be a Petro Dollar anymore, it will be the IRS Dollar. If the empire cannot feed on external prey, it will start to feed on prey within it’s regional borders, meaning it’s own citizens. More taxes and fees and shakedowns and manipulated financial markets and financial news to feed into frenzies and behind the scenes money moves. At the end of the day, taxes have to be paid. We all know that the IRS will find you even when the military can’t. Inflation through money printing means more taxes.
Petroleum sales make up a much smaller fraction of global trade than they did in the 1970s. The importance of the Petrodollar probably started to decline in the mid-1980s with the deliberate engineering of an oil price collapse (at great cost to the US oil industry) to starve the USSR of foreign earnings from oil exports. This is what brought down the USSR, not Star Wars, Afghanistan or “Tear down this wall”.
High interest rates (compared to other options) -> foreign capital inflow.
High capital inflow -> high dollar, carefree deficit spending
High dollar -> large trade deficit.
Who produces anything in the US? Foreign companies that bought former US companies?
You need to start riding the Fed cock hard like Wolf Richter over on Wolfstreet. How will you bring in that WEF money if you put out stuff like this. You need to learn how to be a sheep handler. ………unless playing good-cop bad-cop in a diametrically opposed configuration of secret cooperation.
6 months ago I followed the wisdom of the Wolf and put a lot of money into Tesla and Waymo………….and Look at me now baby! I’m rolling in it. I’ve put of buying a house for 8 years to avoid being one of the suckers who bites into this Housing Bubble 2.0 and I’ve been smugly laughing at all those fools who bought property over the last many years. Better yet, I am so sure that inflation is under control at this point that I started buying longer dated treasuries because the Fed has no reason to increase interest rates when all their trustworthy data shows things are completely under control, something about it being transitory or coming down or whatever. Anyway, stop being so negative. House prices have been falling across the country and it’s almost time for everyone on the side lines to jump in now that demand has cratered. I’ve got my eyes on California now that no one lives there anymore. Later this year, I’m going to buy a condo in the same ivory tower that Wolf lives in so that I can have all of my food delivered straight to my residence so I don’t have to see the peasants sleeping on the streets and soiling themselves. What’s the matter, don’t you want to be a money grubbing foreigner who tells Americans how dumb they are for not coming up in life by idolizing Mun-eee?
Another day, another nutcase. Plonk.
Superb sarcasm just when I thought it died on this site, and even more on Wolfstreet.
Please go on.
@Maximus…That’s what I was thinking…’SARCASM’…but you never know these days.
Haven’t you seen all those signs at the parks that say “Please Do Not Feed The Bears” ???!!!!
Well here is some food from Thoth…..
Every time Wolf calls someone a dumbass for giving ‘anecdotal examples’ and personal observations, they are probably more right than he is. It’s those with their ears to the rails that are getting hit by the fed freight train the least often, compared to those who are sitting next to the tracks and starring off at the bend. The great thing about Wolfstreet is that you don’t need to pay attention to trains of thought besides his one article a day that gives you all you need to know about the financial world. Ask his bubbly buddy named Debt-free-bubba in the comments section about Wolf’s great wisdom.
Instead of seeing the train coming, following Wolf Street will help you miss seeing the train entirely, even once it’s past, but as a ghost you can read his article about it after the fact like as an obituary about how you got hit by it. I know people worship at the feet of the God-of-Data (US Census, bureau of labor statistics, the Fed), and every likes a good graph, but to get those pretty graphs you have to really be more concerned with hindsight that lacks an authentic explanation. For those who appreciate watching local weather forecast for your area three months after the fact, Wolfstreet is the place to be. Just don’t ‘abuse’ his website as it might interrupt the financial wannabe circle-jerk going on there.
People should seriously ask themselves if reading his website is feel informed without being informed. Gold has doubled in dallar-value along with real estate. He tows the fed line while pretending at times to be slightly critical of it. Very suspicious to say the least.
Wolfman at Wolf Street blog website has been hawkish as far as inflation.
He’s essentially been saying they need to maintain the Federal Funds rate at 5.5% to get PCE and CPI below 2.5% for a 6 month average.
And the Federal Reserve has been effective at lowering PCE from 7% to currently 2.7%.
I think the economy can sustain positive economic growth with PCE between 2.5% and 3.5%.
I appreciate Wolfman and Mister Mish.
Thanks
I suspect rent will drop from 0.4% per month to 0.3% or even 0.2% or lower in May, June or July.
Perhaps 0.3 in May and 0.2 in July
A July rate cut is not out of the question.
Think I will do a post on this.
That Michael Bonnomo guy doing podcasts while walking through Florida had infinitely more credibility than Wolf Richter.
Wolfman at the blog Wolf Street has been warning about the stock market bubble. He’s not a kool aid drinker as far as asset bubbles, and especially in regards to consumer debt and federal government deficit spending.
Considering that USA is now a big exporter of oil and LNG, plus arms, the trade deficit is worst than awful, is scary. It seems american industry doesn’t sell abroad a pencil.
Most broads don’t want pencils.
What was their forecast for Q1 vs the advance report?