Following a string of bad economic numbers, the final GDPNow Forecast for third-quarter GDP is 0.2%.
However a full two percentage points of that number is an inventory build. Since inventories net to zero over time, GDPNow's true bottom line estimate is -1.8%.
In contrast, the Bloomberg Econoday consensus is a much higher 2.7% in a range of 1.6% to 4.8%. Econoday does not net out real final sales.
Someone is going to be hugely wrong, and possibly everyone if we see a number like 1.4%.
Goods Trade Deficit Expands a Shocking 9.2% as Exports Plunge
Earlier today I noted Goods Trade Deficit Expands a Shocking 9.2% as Exports Plunge
The GDPNow estimate makes more sense to me, and seemingly to the bond market as well as yields plunged across the board but especially on the long end.
I will cover bonds in a separate post, but the bond market reaction is as if the GDPNow estimate is correct. This is due to the fact that exports add to GDP while imports subtract.
Inflation also subtracts from real GDP and inflation has been running hot.
It's possible the GDPNow model overstated the trade balance impact. A previous plunge in the model was also trade related.
If the GDPNow model has the trade impact correct, and I believe it does, then look for GDPNow to be much closer than the Econoday consensus.
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