Today, the Atlanta Fed released it’s 2nd quarter GDPNow Estimate.
However, today’s Personal Income and Expenditures report was for March, a first quarter GDP Item. Spending was very weak.
I asked Patrick Higgins, the GDPNow creator, how today’s report would have affected the GDPNowcast for first quarter.
His answer was inconclusive …
It’s hard to say since this is the first forecast for Q2. It is the case the growth rate for March real PCE growth was about a percentage point lower (annualized) than the model was projecting when making the forecast for Q1 growth. But it’s also true that there was an upward revision to February’s growth rate for real PCE growth. Q1 real PCE growth was 1.86%, about in line with the GDPNow forecast [1.92%].
The above table shows the effect Higgins mentioned.
Real PCE for January was revised from +0.2% to +0.3%.
However note the first three months this year: 0.0% January, 0.3% February, and 0.0% March.
Compare those Real PCE numbers to the previous quarter: 0.1% October, 0.3% November, and 0.2% December.
The slowdown in personal spending is very noticeable, roughly half the previous quarter.
Also note the very unusual decline in Real services expenditures. The economy is sliding very fast if the decline in services holds.
- Personal Spending Weak Despite Solid Wage Gains, Autos Disappoint Again, Services Shockingly Weak
- GDPNow 2nd Quarter Estimate at 1.8%; NY Fed Nowcast 0.8%; Blue Chip 2.3%
Also consider First Quarter GDP Likely Overstated (And Don’t Expect a Huge 2nd Quarter Bounce)
Mike “Mish” Shedlock
Tony Bennett said:
“Real PCE for January was revised from +0.2% to +0.3%.”
I think you meant February.
A few things
Q1 had a 2 quirks of calendar … were they properly adjusted?
Leap Year and Early Easter
Also Individual tax refunds for fiscal year ran about the same till March … then March 2016 saw a $6 billion increase over March 2015…. current month to date refunds running about $5 billion behind April 2015.
If March real PCE flat even with +$6 billion in IRS refunds … how will April fare with $5 billion less than April 2015??
If its impossible to compute an accurate CPI, it will be even more impossible to accurately compute a broader based GDP deflator. GDP should be measured by total number of useful widgets, and total hours of useful services, not dollar amounts adjusted by some subjective percentage.
Empty McMansions and other Keynesian pyramids should be excluded.
That reminds me…. I meant to check and see how much rent I could have gotten for my house if I lived in my garden shed all winter. Obama’s next executive order might be that I have to do just that to house some migrants.