The Initial GDPNow Forecast for Third-Quarter GDP is 2.1 Percent

July 29, 2022

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4:15 pm

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19 comments

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Economics

*GDPNow 2022 Q3 initial estimate from the Atlanta Fed, annotations by Mish.*

I’ll Take the Under

Betting the initial estimate is too high is historically a good bet. Estimates tend to start out high, then sink through the quarter. GDPNow final estimates are generally pretty accurate.

A few points is not enough for me to graph. So early in the quarter, I use the GDPNow graph.

Final Forecast for 2022 Q2

*GDPNow Q2 final estimate data from the Atlanta Fed, chart by Mish.*

Synopsis

The initial GDPNow forecast for 2022 Q2 was 1.9 percent with real final sales at 3.0 percent.
The final GDPNow forecast for 2022 Q1 was -1.2 percent with real final sales at 1.1 percent.
The actual GDP report was -0.9 percent GDP with real final sales at 1.1 percent.

Real final sales is the true bottom line measure of the economy. The rest is inventory adjustments that net to zero over time.

January 28, 2022 Flashback

*GDPNow 2022 Q1 initial estimate from the Atlanta Fed, annotations by Mish.*

On January 28, I commented With Nearly Everyone Looking the Other Way, It’s Time to Discuss Recession

The economy is not soaring as widely believed. Details show weakness and there are six strong reasons to believe that weakness will accelerate.

The final GDP report for the first quarter was -1.6 percent with real final sales at -1.2 percent.

GDP is -0.9 Percent, Second Straight Decline, But a Recession Did Not Start in Q1

Yesterday, I commented GDP is -0.9 Percent, Second Straight Decline, But a Recession Did Not Start in Q1

There will be talk of a recession starting in the first quarter. Forget about it. Look for May as the start.

I peg the recession start in May based off a plunge in retail sales in May coupled with a very deteriorating housing picture that also happened in May.

Looking Ahead

This initial GDPNow forecast does nothing to change my opinion. Historically speaking, it shouldn’t.

Much of GDP changes very little throughout the quarter (military spending, Medicare, Social Security, food stamps, etc.)

It’s cyclicals (durable goods and housing) that tend to drive expansions and recessions.

Cyclical Discussion

July 12, 2022: Cyclical Components of GDP, the Most Important Chart in Macro
July 14, 2022: A Big Housing Bust is the Key to Understanding This Recession

Housing rates to be another big bust this quarter. And durable goods rate to follow housing.

This post originated at MishTalk.Com.

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19 Comments

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PapaDave

3 years ago

Gross Domestic Income is another measure of the US economy. GDI was up 1.8% in Q1. Q2 results will be out in August.

shamrock

3 years ago

Nominal 2nd quarter GDP was 8% and deflated down to -0.9%. People and businesses are spending a lot more money, just getting a little less for it.

JackWebb

3 years ago

Reply to shamrock

Your point, again?

Doug78

3 years ago

When you are in a recession you know it because you and those around you feel it. Right now some are feeling it and some are not so we are probably on the borderline which reinforces Mish’s opinion that the recession will be shallow and will be with jobs. The unknown then is how long it will last and that depends on exogenous factors namely how the Ukraine war will affect commodity prices and supply chains. In that your guess is a good as mine (unless I disagree with you of course).

Tony Bennett

3 years ago

Gotta love “experts”

The Philadelphia Federal Reserve Bank has a quarterly survey of professional forecasters. The most recent survey published on May 13th. 34 forecasters canvassed. On the probability of a negative Q2 GDP 26 responded (no response from 8) … only ONE “expert” gave a probability > 40%.

https://www.philadelphiafed.org/surveys-and-data/real-time-data-research/spf-q2-2022

MPO45

3 years ago

Reply to Tony Bennett

Which “expert” should we be listening to Tony?

JackWebb

3 years ago

Reply to Tony Bennett

Economists are useless as forecasters. At most, they are coincident indicators. There are high penalties for being wrong, but only if a forecast is both wrong and non-consensus. If the forecast is wrong but consensus, no penalties. No rewards for being right and consensus, and scant rewards for being right and non-consensus. The result is useless mush.

Bottom line: Economists are paid to be part of the pack. Departing from the consensus in either direction is very high risk with negligible rewards.

MPO45

3 years ago

Reply to JackWebb

we live in an age where virtually every transaction is computerized. Payroll, retail sales, credit card charges, check writing, etc. We should have real time access to how the economy is doing on a minute by minute basis. Someone, somewhere has this data, we shouldn’t have to wait for 4 months to learn we were in a recession 4 months ago.

JackWebb

3 years ago

Reply to MPO45

“We are in a recession” is a coincident indicator, and I see nothing that would be that coincident. You really do have to wait until you see the whites of its eyes before making the declaration. Mish made a prediction, and those are a different animal. What’s amusing now is how many talking heads, including Xiden’s spokesliars and diaper-sniffers, are still denying the obvious. That takes corruption or incompetence, the difference depending on a combination of sincerity, stupidity, and ignorance.

Christoball

3 years ago

As with all recessions it is just an indication of society living within it’s means rather than living within it’s leverage capacity. People say recession like it is a bad thing, but I always felt that recessions were necessary for productivity gains because money is forced to flow to essentials rather than indulgences. The get rich quick people loose a lot of steam with reduced leverage and are less able to leave everyone else in the dust. I always gain a lot of traction during recessions because my investment model is not leveraged.

Maximus_Minimus

3 years ago

Reply to Christoball

Recessions are periodic events where the reckless get burned and the prudent get validated.

When the reckless bottom get hold of the system, the prudent get burned and the reckless get validated.

This pattern has been going on for so long, it’s ingrained in the popular psyche.

MPO45

3 years ago

P&G has a big earnings miss and they cited inflation as the core problem. Oil companies had record profits which means record bonuses for workers.

Even though we’re in a recession, I still think inflation will be high. IMHO, this is creating a huge opportunity to load up on some key stocks. Recessions last 10 to 18 months so every big dip is a good time to buy (for me). And as a hedge, I will continue to load up on I-Bonds. Too bad the max is 10k/year per person.

TLinFL

3 years ago

Reply to MPO45

You can exceed the 10k/year cap by having your income tax return go directly to Treasury Direct

MPO45

3 years ago

Reply to TLinFL

You think I get a tax refund? Lol. I have tax bills in the six figures. I did open up accounts for my spouse and kids but that’s still only 40k per year and they that’s about 4k in interest that I gotta pay taxes on.

TLinFL

3 years ago

Reply to MPO45

You can always add additional payments just for that purpose at the end of the year

Doug78

3 years ago

Reply to MPO45

Let me tell you how impressed I am to learn that you have a tax bill in the six figures and I assume that the six figures do not include decimals.

MPO45

3 years ago

Reply to Doug78

Impressed? It should be shame that people have to pay taxes in the six figures (decimal free). We also get ZERO tax breaks. ZERO.

Doug78

3 years ago

Reply to MPO45

Let me also congratulate you on having the courage to allude to everyone that you are wealthy and although you have not given any proof I am sure that you are telling the truth because most people in anonymous forums do tell the truth about their personal finances. I hope to see in the future further revelations as to your considerable capital gains made in the stock, bond, currency and commodity markets. Let me also add my sympathies for your having to pay taxes which as everyone knows is theft and the more tax you pay the more theft it is so I can understand your indignation at having to pay, through coercion, taxes.

Billy

3 years ago

Remember when everyone thought we were going into a recession?

The Initial GDPNow Forecast for Third-Quarter GDP is 2.1 Percent

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