The BEA revised GDP from 2.8% to 3.0%. GDI is much more believable at 1.3% with negative revisions coming.
GDP vs GDI
- GDP and GDI are two measures of the same thing.
- GDI counts what all participants in the economy make, including wages, rental income, and corporate profits.
- GDP measures the value of the goods and services that the economy produces.
- Real means inflation-adjusted.
The gap between GDP and GDI is the biggest on record.
Real GDP, Real Final Sales, Real GDI 2024 Q2 Second Estimate
Real final sales is the bottom line estimate of GDP.
The difference between GDP and Real final sales is change in private inventories (CIPI) that nets to zero over time.
Of the 3.0 percent rise in GDP, 0.8 percentage points is due to inventory evaluation.
Believe GDI
GDI is a more accurate albeit less timely measure of the economy. And given the huge negative revisions in jobs (thus wages), it is by far the more reasonable estimate of the economy.
August 2: Unemployment Rate Jumps, Jobs Rise Only 114,000 with More Negative Revisions
August 21: BLS Revises Jobs Down by 818,000 the Most Ever, About 68,000 Per Month
Regarding the -818,000 jobs revision, I expected some of that to hit first quarter revised estimates but that will not happen until next month per the BEA. “New QCEW data for the first quarter of 2024 will be incorporated in next month’s release along with the 2024 Annual Update of the National Economic Accounts.”
Meanwhile GDI is floundering at 1.3 percent (and soon to be revised lower) vs an alleged 3.0 percent for GDP.
Recession Has Started
I am sticking with this assessment: Improving the McKelvey Recession Indicator, No False Negative or Positive Signals
Since 1953, every time the economy was in the current state, the economy was in recession.
That does not make the odds 100 percent because everything is up to the NBER, the official arbiter of recessions.
Apparently, a lot of the growth consumer spending (and hence GDP) is due to debt. E.g. credit card debt rose from $770 billion in early 2021 to $1.14 trillion in the most recent quarter, while household debt increased from $14.64 trillion to $17.8 trillion in the same period. That’s pretty significant.
This debt, and the spending it generates, is from money created in large part by banks. This money does not need bear any relationship to deposits (e.g. savings). It’s created out of thin air, consistent with capital rules etc. So, it would seem that right here, there is a disconnect between consumer spending and consumer income, at least when you consider lags.
I can see how GDI and GDP are theoretically the same thing over the long term, but in the short term, with the huge amount of debt fueling the economy, isn’t it normal for them to differ significantly and unpredictably?
But the divergence is new.
For your thesis to hold it would need supporting data going back up to 50 years.
I finally understand why so many people have such a hard time understanding the Government’s Data, and most definitely the Government’s understanding of the data, and then the Government’s explanation and conclusions that they make(up) from it all.
This is what gets shared with the Public to digest, if they can, but they can’t, because it’s so Convoluted and full of peoples Opinions, and No Actual Real Data that’s provable, deniable, able to be verified, or just outright Lies.
“(These) makes my point”
The BEA (Revised) GDP from 2.8% to 3.0%. GDI is (much more believable) at 1.3% with (Negative Revisions) coming.
GDP and GDI are two measures of the same thing. (Why are they different)?
GDI counts what all participants in the economy make, including wages, rental income, and corporate profits. (Different than GDP below)?
GDP measures the value of the goods and services that the economy produces.(Different from GDI above)?
Real means inflation-adjusted. (So Real=Adjusted)?
The gap between GDP and GDI is the biggest on record. (Why a Gap if they are the Same Damn Thing)?
Real GDP, Real Final Sales, Real GDI 2024 Q2 Second Estimate (If Real, Why an Estimate)?
Real GDP, Real Final Sales, Real GDI 2024 Q2 Second Estimate (If Real, Why an Estimate)?
Real final sales is the bottom line estimate of GDP. (If Real, Why an Estimate)?
The difference between GDP and Real final sales is change in private inventories (CIPI) that nets to zero over time. (WTF)?
Of the 3.0 percent rise in GDP, 0.8 percentage points is due to inventory evaluation. (So what is the balance of 2.2%)?
Believe GDI (Why Should OR Would Anyone)?
GDI is a more accurate (How Much More)? albeit less timely measure (How Less Timely)?
of the economy. And given the huge negative revisions (How Huge)? in jobs (thus wages), it is by far the more reasonable estimate (How Reasonable IS The Estimate) of the economy.?
We Found the One Group (Which Group)? of Americans Who Are Most Likely (How Likely IS More Likely)? to Spread Fake News (What News and How Fake)?
See what I mean? Everything is so damn convoluted!!!
More of the same BS:
In newly (How New) published (When) research, we (Who=We)? found that it’s not conservatives (in general) who (tend to promote false information), but rather a (smaller subset) of them who also share two (psychological traits): (low levels of conscientiousness) and an (appetite for chaos). Importantly, we found that (several other factors we tested) for — including support for former President Donald Trump — did not (reliably predict) an inclination to share misinformation.
Seriously…
Yes. All the economic stats (govt or private) are just best guesses that will be revised over and over again. The surprising thing to me is that people seem to be upset that they are not more accurate. Sorry folks. They will never be more accurate. Which is why I always suggest that you look at all numbers in aggregate, and look at their trend over time. Rather than looking at one number in detail.
It was around two years ago that Mish was talking about how GDP numbers were indicating the economy was much weaker than other stats were portraying. I suggested to him that he also look at GDI which, at the time, was showing far more strength than GDP.
Fortunately, he started adding GDI to his analysis. Which I appreciated. He loves to dig into the details that I can’t be bothered with. I believe it’s better to look at both GDP and GDI. But still take them with a grain of salt. After all, they always be a rough guess.
I agree Papa, but the issue I have isn’t with the Accuracy, as that is always a moving target, but the wild fluctuations that get me wound up.
My role in life for awhile, was numbers and management of such (Intl. Supply Chain Management), and while off at times, adjustments are made to smooth those bumps out. I could not have done my job, and nobody down line could even start there’s, if I reported numbers like that! You can’t schedule workload properly, or have skilled labor in place at the right times, or any order in the supply chain, with such varying numbers that constantly change with no understanding, and no flattening out of the curve.
I have been in Manufacturing my entire career, and in the supply chain role in most of it. I don’t even understand how it’s being handled or not handled I guess is the case. It just doesn’t work this way successfully IMHO of 35 years in the business, at high levels.
I am not seeing or understanding something in the industry, that wasn’t even allowed to exist when I was involved in it. I would have been fired on the spot after the second wild ass miss with no explanation on why, how, and when… JS…
I understand. But there is quite a difference between numbers for one company and numbers for all of them combined.
It isn’t practical to survey all 33 million businesses or 127 million households in the economy. So they have to take a sample of fewer than 1% of all businesses and households. And most businesses who choose to participate, don’t have a lot of spare time to care how accurate their reporting is.
Add in a lot of statistical mumbo jumbo (seasonality, smoothing, OER, birth/death, etc etc) which are all well meaning, but further confuse the issue.
Net result; these numbers cannot be anything more than best guesses. My point is that they will always be this way. And you should take them with a grain of salt. Look at them in aggregate, and look at their trend lines over time.
They can’t be perfect. Perfect is the enemy of “good enough to be somewhat useful”.
I get that, but then why use them at all, if as you say: “So they have to take a sample of fewer than 1% of all businesses and households. And most businesses who choose to participate, don’t have a lot of spare time to care how accurate their reporting is”
This means to me, that all your data is thereby automatically skewed, but how much and which way is completely unknown. Thus, any use of said data would be suspect to then rely on for anything more than propaganda, because at this point, that’s all it is. (1% peek @ a 100% Issue).
Also as you say: “Add in a lot of statistical mumbo jumbo (seasonality, smoothing, OER, birth/death, etc etc) which are all well meaning, but further confuse the issue” I am seeing the issue as ONLY using 1% solution for a 100% Problem.
Again as you say: “Net result; these numbers cannot be anything more than best guesses” My Point Exactly, so Why Use Them? Making them up would be better than 1%?
I can’t agree with taking any numbers that are so misrepresented, as anything to gamble my future on. Grain of salt or otherwise. I understand that they can’t be perfect, but 1% is reckless. 50% a coin flip, 65%-70% a gamble, and then your onto a level of more sophisticated, costly, accurate, and still risky. Just much better odds, with bigger return, but more to lose.
I get both sides of that coin, and 30 years ago I would probably have went with the 1%… TY for the insight.
Of all of the distorted economic related figures that are released, none can compare with that for inflation.
Do you mean inventory accumulation?
Still at stall speed. GDP is still positive. Just because people can’t spend on what they want doesn’t mean GDP isn’t positive. Because of globalization, I’ve long been saying people will spend less on what they want and more on what they need. Americans and people in America in general are not entitled to a high standard of living forever.
No, but it’s gone on for far, far longer than the Peter Schiffs and the Harry Dents of the world thought possible. Seems like the Eurodollar/Petrodollar system was the gift (scheme) that never stops giving.
Two negative GDP equal recession. Perhaps not if add the black market. Sahm
or McK indicator might indicate recession, but the unemployed might work in the black market. When the unemployment checks stop, they are looking for a job. They know the rules better than lawyers. They tell their boss that within 3 weeks the unemployment checks will stop. They have to leave, therefore u have to look for replacement, for another worker. This cycle is well known. They move from one hand to another, keeping the black market alive.
When you systematically lie and understate inflation, you get an egregious additional benefit in that the falsehood automatically exaggerates GDP……Ive been pointing this out for many years but no one else seems to have caught on……
Yuuuuppppp …. you mean, no one outside Mish comment team …
Questioning inflation is as continuous as questioning the COVID vax…it’s become political and gets one immediately slammed by the TDS crowd.
well the good news is you can’t like about it. Gold vs real rates are at record divergence. USTs are certificates of confiscation at these levels
“lie” sorry
What could possibly go wrong? The GDI numbers are incorrect like the job numbers for 2024?
Certainly, expect negative revisions to GDP.
I smell money printing!!!
The wizard augurs the entrails of a government goat so he can eat the goat.
The upward revision in GDP was due to consumer spending., is spending on healthcare and prescription drugs included in GDP?
yes and no
Yes if paid directly by consumers
Yes if paid by employers as part of benefits
No if transfer payments by Govt (example Medicare of Medicaid)
In the black businesses pay cash using cash received from their customer. If they don’t have enough they either borrow or liquidate inventory. A few of them collect unemployment checks plus cash they earn, or working part time plus cash. If the black market is 5M/8M the nominal GDP ==> the under the radar black market plus the official $28.6T GDP. A large black market improve the ratio : $35T gov Debt/ GDP. Many third world countries feast on the US black market. Their biggest export is young people who support their families in Egypt, Nigeria, Venezuela…
July is the inflection point.
Could very well be.
What if illegal immigrants are being paid under the table, and are written off as business expenses rather than employees on fraudulent tax forms? How much money is 10+ million illegal immigrants?
so you ask … 10M illegals (low est) at $20K/year (high est) is $0.2T so 1% of ~$20T economy … very meaningful at the margins although not that impactful. (my take is est 20M illegals at 10-30 hrs/wk and ~$10K/yr …same impact)
What’s meaningful is the heath-care, housing and EBT, any maybe travel handouts. Keeps ER docs, apartments/hotels, and walmart/circle-Ks flush with a bit left over for airlines. Again, probably a few 100B.
It does have an effect … try and get a mid-range hotel in NYC. That said, the “newcomers” (illegals is so pejorative..but accurate) seem to be blending in as election approaches.
yes !
The consumer obviously boycotted Dollar General and then had some pent up demand and went to Walmart. And bought more gas because its further away. GDP lol. Geico pig out the window. Thanks for your attention to GDI.
Dollar General missed. But Best Buy had an upbeat report and solid forecast. Some consumers are still spending strong.
Hard to interpret. Which is why I come here to get Mish’s outlook.
I agree that the economy is experiencing slow growth. Whether it is a recession or not seems more like an academic exercise.
I am still enjoying trading the volatility. Regarding the 7 oil stocks in the “falling knife” portfolio: I have bought and sold every one of those stocks several times since it was created. Volatility is the gift that keeps on giving. No matter if the economy is growing slowly.
It is not hard to interpret. Dollar general’s customers are very poor to lower middle class. Best Buy is a much higher income consumer. What happened between the two companies is exactly what Mish has been saying all along. Asset holders are doing very well. Everyone else, no bueno.
Could be. But the miss was not because sales were down. Sales rose 4.2%. But that was shy of expectations. Gross margins dropped from 31% to 29% as cost of goods was up 5.9%.
It is still easy to understand if you had looked under the hood. DG sold a lot more lower margin goods such as food.
Sales still went up. Are you saying that the poor are worse off because they are buying more food?
Walmart sells products at a lower price than Dollar General. while Best Buy sells at a lower or at least competitive price compared to their retail cohort. There’s your interpretation.