Accounting for gold, the nowcasts are 2 percentage points better than the model shows.
In addition to the update on gold, we also have an advance look at how today’s jobs report boosted GDPNow.
Pat Higgins, creator of GDPNow explains on Linked-In, For GDP Forecasters, Some Gold Doesn’t Glitter
We generally take a hands-off approach in updating and distributing our GDPNow model forecasts. With one exception, once a forecast quarter begins, the code of the model does not change. Any tweaks to the model are made at the beginning of the subsequent quarter.
The one exception was in spring 2020, when changes were made so that some monthly indicators showing steep declines early in the COVID-19 pandemic wouldn’t be treated as outliers and ignored as they normally would.
While not on that level, the unusual widening of the January trade deficit that led to much of GDPNow’s sharp decline on February 28, and the circumstances surrounding that decline, was also unprecedented in one respect. That is, as we now know from the March 6 full international trade report—but could only strongly suspect based on anecdotal and non-US government data until then—much of the widening of the trade deficit in January was due to an increase in nonmonetary gold imports from $13.2 billion in December to $32.6 billion in January. This accounted for nearly 60 percent of the widening of the goods trade deficit.
Although GDPNow does [not] distinguish gold from other imports, the Bureau of Economic Analysis does, in tallying up the total of the net exports, subaggregate within GDP. Removing gold from imports and exports leads to an increase in both GDPNow’s topline growth forecast and the contribution of net exports to that forecast, of about 2 percentage points. The topline growth forecasts also increased today—standard model -2.4 percent to -1.6 percent, “gold adjusted” model -0.4 percent to 0.4 percent—as data from today’s labor market report came in stronger than the model was expecting based on the limited February data the model received prior to that release.
The attached forecast tables include both the standard GDPNow forecast and the gold adjusted forecast. We will continue to update the standard GDPNow model through at least the end of the quarter but will add at least some occasional updates from the gold adjusted version as well.
GDPNow Gold Update
The above update shows the top-line estimate to GDPNow.
Real Final Sales is the more important bottom-line number. The difference between the two is Change in Private Inventories (CIPI) that nets to zero over time.
Higgins doesn’t show Real Final Sales reflective of today’s unemployment report but I will take a stab at (+0.8 for Employment – (0.57 – 0.43) for CIPI), a net of +0.64 to (-2.8 + 2.0) = -0.16.
We will find out on Monday.
If +2.0 to the Nowcast for gold applies to Real Final Sales as well (I have a question into Higgins), then I will post gold-adjusted numbers going forward on my charts, with a note.
I see little reason posting numbers known to be wrong.
Employment Added to GDPNow
Higgins said “ today’s labor market report came in stronger than the model was expecting based on the limited February data the model received prior to that release.“
As I have commented, it’s not the data that matters (the report was bad), it’s the data vs what the model expected (not what economists expected).
Today, the jobs consensus was 160,000 vs an actual of 151,000 with significant negative revisions too.
But for whatever reason (I strongly suspect wage growth), the model liked today’s report, boosting PCE spending estimates by 0.42 percentage points.
Related Posts
March 7: Employment Drops by 588,000 as Jobs Increase by Weaker Than Expected 151,000
Beneath a weak headline jobs number, the details are even weaker.
Total full-time work dropped by 1.22 million.
March 7, 2025: A Historical Look at Unemployment Rates Heading Into Recessions
In 1994, the BLS made huge changes in the calculation of the unemployment rate. So that’s all the further back I look.
March 6: Trump Makes Imports Great Again With Two New Record Trade Deficits
The Census Department reports two new records trade deficits in January.
It was the gold in those imports that hammered the GDPNow forecast.
But please note that even the gold-adjusted base forecast is down 2.9 percent to 0.4 percent in less than a month. Real Final Sales is nearly flat if not negative.
Factor in tariff gyrations and DOGE layoffs and we are headed for a negative quarter.
Addendum
For those unaware, I was adjusting GDPNow before Higgins’ Link-In post.
For discussion, please see How Did Gold Imports Exacerbate the Huge Decline in GDPNow Nowcast?
“I see little reason posting numbers known to be wrong.”
Agree. Let’s put an end to this clown show. End the FED starting with the ATL FED and the ridiculously wrong GDP NOW.
Trump wants to redefine GDP and not publish other economic data. Any thoughts on this from anyone ? We are headed towards a Russian-style autocracy faster than you can imagine.
As opposed to the totally fake, fraudulent garbage that currently masquerades as “economic data”?
Clinton changed the definition of unemployment. Biden was into censorship, which is a feature of autocracy. Democrats tried to keep Trump off the ballot in 2024, which is another feature of autocracy. Must be we have been headed for a Russian style autocracy for some time now.
Under the banner of freedom of expression and self determination a Muslim protester climbed on the British parliament and raised a Palestinian flag. London police closed the area bc the mob might threaten a synagogue nearby during the Jewish Sabbath. . The UK has a large standing army but never used it against their citizens. They didn’t do it on Scotland. Canada didn’t do it against Quebec. The EU during Brexit. The US sent a standing army to Nashville to enforce civil rights laws. Lincoln sent an army to prevent secession.
Muslim is just the Arabic word for one who submits to God. It means the same thing as Jews or Christians who are humble and repentant and follow the Scripture believing we all will face judgment one day. The person who put up the flag was just acting foolishly. It’s wrong to incite religious division.
Powell, without trying to, did the right thing. Powell inadvertently drove the banks out of the savings business, increasing the supply of loan funds and driving rates lower than they otherwise would be (which doesn’t reduce the size of the payments’ system). Shadow stats describes this as a “flight to liquidity”. This raised the transaction’s velocity of funds.
Link: George Garvey:
Deposit Velocity and Its Significance (stlouisfed.org)
“Obviously, velocity of total deposits, including time deposits, is considerably lower than that computed for demand deposits alone. The precise difference between the two sets of ratios would depend on the relative share of time deposits in the total as well as on the respective turnover rates of the two types of deposits.”
This plus the draining of the O/N RRP facility has kept rates lower.
This is like the 1966 Interest Rate Adjustment Act where there was no recession.
When a gov increase debt to repair roads, bridges and build modern factories it’s a good thing. After saving the banks in 2008 the Fed raised rates in late 2014 to extract negative rates. JP dropped them in Dec 2018 during the stock market plunge. When the 2020 recession was over the Fed sucked RRP liquidity first, before raising rates to 5%.
Gold hasn’t changed the trend. The trend for short-term monetary flows, the volume and velocity of money, the proxy for the real-output of goods and services, is lower. The trend for long-term monetary flows, the proxy for inflation is higher. The diversion produces stagflation, business stagnation accompanied by inflation.
Gold is currency. It protect investors when a country lose a war or default on its debt. Is the US, EU, India or China going to default. Are we on a cusp of a major war ???
No, but confidence in the US is declining.
Confidence in the US, the Eurozone, India, and China is declining. It’s a race to the sinkhole
There are a couple curious points about gold from London being shipped from London to the US in order to beat tariffs. Gold is traded. It moves around the world to back contracts. So why has gold from other countries with gold exchanges NOT sent some gold to the US to beat tariffs? And for those countries with reciprocating tariffs, it makes no sense to avoid paying a US tariff when gold will face a tariff when it comes back.
A whole new set of problems arise after tariffs go into effect. Gold contracts will need to have tariffs priced in to pay tariffs. Who pays the difference in the tariff if gold does not close at the contract price the day of arrival at ports? Are there rebates to the contract buyer if gold closes lower than strike price? What happens to gold futures when both parties are located where tariffs do not apply?
London morning fix + 25% tariffs ???
These co imported raw materials and components from all over the world. Unsold inventory is rising. If orders will not come import will plunge. Import from China ==> in a dead cat bounce. Trump might settle with Canada and Mexico, but not with China. Xi fragility is growing. As long as the Chinese econ was growing he was able to prevent it from breaking apart. Trump increased centrifugal forces in China. Xi has our target on his back. That’s why China was threatening us with a war. Xi might lose his grip on the country. Tariffs are not about fentanyl. It’s about Chinese econ, human rights, bureaucracy and leadership breakdown that are plaguing China.
GDP is $30T plus a few more trillions of black market activities, Co never report about their day job workers and about their cash sales/ receipts. When business people preempted tariffs they picked up a few more workers in the black market. The invisible payroll was rising. These people spent money on food, shelter, transportation….
I’m worried for Fort Knox.
Fort Knox, Fart Knocks, what does it really mean just having video footage of gold bars… there are loads in HSBC vaults under the streets of London, most of which “owned” by somebody else.
Based upon the BEA and their fudging the numbers to make the GDP look good, why doesn’t the BEA also back out what they “ballpark” to be the importers jumping ahead of the Trump tariffs of purchases from China, India, Japan, the rest of Asia, Europe and the ROW.
Figures don’t lie but liars can figure.
January numbers were revised down. February will be too. As of now no one can deal with the uncertainty Trump has brought. The market has given back all the gains since election day. Trump has thus far been an economic disaster. Prices continue to rise. Supply chains hate uncertainty in business.
Only Janet Yellen can save us now. She knows how to manage the economy.
Thanks for all your hard work mike. Have a good weekend.
Thanks – You too
From all recent reports, there is a ton of gold being shipped from the London vaults, to Switzerland and on into the US to the Comex where buyers are demanding physical delivery.
The delivery dates for physical gold are also rising in London.
I am wondering if the US is merely re-shoring loaned out gold from Ft Knox and other US repositories.
In other words, is this a US plan to reduce the availability of gold for the Brics countries to keep buying, and the Brics wannabe’s who hope to bolster their own gold reserves.
There seems to be more to this story than just the arbitration opportunity between London and US gold prices which encourages gold to be shipped into the US along with the rising trade deficit (due largely to gold imports)
The Mises institute has an interesting article about Roosevelts move to confiscate American’s gold (to Fort Knox et al), and then re=value it higher…causing a depreciation of the dollar. Maybe thats how the US will pay off a lot of its debt?????
Most of the debt is owed to ourselves. I don’t think Trump is going to be paying any foreign nation anything. I wouldn’t rule out the US starting to miss bond payments.