Ahead of the advance (first) report of 2nd quarter GDP, Markit Chief economist Chris Williamson estimated second quarter at 1.0%.
The reported result was 1.1% and it’s likely to be downgraded tomorrow in the second estimate coming up tomorrow.
Today, Williamson forecasts “just under 1.0%” for the third quarter.
Service Sector Slowdown Intact
Williamson’s third quarter estimate comes in a comment to today’s Markit Flash U.S. Services PMI™ report that shows Service sector growth remains sluggish in August.
Key Findings
Weakest rise in services activity since February
Payroll numbers expand at slowest pace for 20 months
Business expectations remain stronger than the survey-record low seen in June
Markit Services PMI
“Latest data signalled that new work expanded at the slowest pace since May and remained much weaker than its post-crisis trend. This contributed to a renewed slowdown in job creation during August, with payroll numbers rising at the least marked rate since December 2014. Some firms reported that subdued demand conditions and the need to cut costs had led to more cautious staff hiring plans and the non-replacement of leavers.”
Comments from Chris Williamson, Chief Business Economist
- “The ongoing lacklustre economic growth signalled by the flash PMI suggests GDP growth is failing to accelerate in the third quarter from the weak 1.2% pace seen in the second quarter.”
- “Historical comparisons indicate that the PMI is signalling an annualised GDP growth rate of just under 1% in the third quarter, based on the data for July and August.”
- “With job creation also waning alongside subdued price pressures (the August PMI is consistent with non-farm payrolls rising by just under 130,000), the survey data will fuel expectations that the Fed will be in no rush to tighten policy again.”
- “However, as anecdotal evidence from the survey suggests that business activity is being dampened by uncertainty due to the upcoming presidential election, there’s a good chance that the economy will pick up speed again after the vote, leaving a December rate hike on the table.”
Mish Comments
I am not a fan of uncertainty, so I discard comment number 4 by Williamson.
Given that the first estimate of third quarter GDP is not out until October 28, well into the 4th quarter I will withhold my personal 3rd quarter prediction for a bit.
But I have stated that I will “take the under” (way under) predictions bantered around by GDPNow and the FRBNY Nowcast (3.4% and 3.0% respectively).
The GDPNnow forecast is from today. The Nowcast update comes out tomorrow. I will take a potshot guess of 2.7% for the Nowcast, with an additional expectation that both forecasts will sink as the quarter goes on.
Expect Lower GDP Report Tomorrow
Given thet GDP revisions go on for years, even decades, this is a total crap shoot but I Expect a Downward Revision to 2nd Quarter GDP Tomorrow.
My guess for the second estimate for second quarter GDP is 0.9%. My first guess, much harder, was 0.8%. The Econoday consensus estimate ahead of the report was a whopping 2.6% in a range of 2.2% to 3.4%.
For details, please see GDP Forecast Roundup: GDPNow, Nowcast, Econoday, Goldman, Markit, ZeroHedge, Mish
At that time, I made the only forecast under 1% (I now have company) and I take another shot at below 1% in tomorrow’s revision.
Williamson’s initial guess was 1.0%. He may very well nail that number tomorrow. This is a crap shoot. Revisions are amazing.
Mike “Mish” Shedlock
Hey Mish
You are going to withhold your 3rd quarter GDP for a while?
What, are you waiting for the quarter to end?
Can we expect your prediction for the Olympic Games later this week?
So, what you are saying is that it could be worse…..that there is a chance of a glorious recovery.
All of this would be so funny if not so tragic.
Is there a “Reset to 1913” Feature at the Fed?
“Is there a “Reset to 1913” Feature at the Fed?”
There should be. Like everything else, the government has distorted the original intent of the FED.
Each district originally set its own FED rate, to reflect the economic differences among districts. They also bought commercial paper, not government debt, which Wilson forced them into, in order to support HIS world war one effort. In 1951, it is said that Truman ended FED independence.
Hi Mish!
Since you are good economic analyzer, Why don’t you analyze steemit.com
and its economic model? steemit.com is aiming to be a ‘facebook killer’ and its underlying technology is blockchain which consists of bitcoin!
I dis a pots on Steemit for a test
Made 0 cents
It’s model as best as I can tell get you money for all the new people you bring into steemit.
Not a great model IMO
The pool of new readers will soon run out.
Maybe I understand the morel wrong but that’s what it looks like
Mish
May want to put the glass of scotch down before posting there, Mish.
Boots on the ground sit rep here. Our capital equipment business is above average strong. Sales are good in South America for landfill leachate which has been neglected forever and pilot testing for electric power, for pig manure, for RO reject, which is a harbinger of future sales is very strong. Europe is dead dead dead. Domestic sales are purely govt. regulation driven. Major new regs in electric power, pig farming, and landfill leachate driving sales. One interesting dynamic we never saw coming is Palm oil. For decades palm growers along the equator world wide ignored environmental compliance. Easy to bribe or ignore regulators world wide. New development is customers (Nestle, Genersl Foods etc. ) tell grower: if you flunk our environmental audit we cannot buy from you. This works! Sales of our water treatment equipment explode. Like it or not we are moving toward a one world govt and large corporations are the key to imposing this new world order. Say goodby to an era cause it’s going by by.
Large corporations ARE government. Things like the Clinton foundation remind us how it all works. The corruption dictates that those who claim power in governance rely on their corporate facilitators to enforce it, and those corporations rely on government to create rules and regulations that lock in their monopolistic attributes. And this all filters downstream to the smallest businesses who understand that to go against the “current” will cause them pain. This is WHY government has embedded itself so completely in our economics, as it is economics that rules. Deciding who can buy and who can sell defines who will EAT and there is no greater boot on the neck of society than that. This is why our right to free speech is so important as it defines all other liberties. Our consumption, our economic activities, is our greatest voice and it is being silenced. At the end of the day it really doesn’t matter what you can say, it matters what you can do, and if your voice brings retribution because your economic choices accurately reflect your voice, you have no choice. They will tolerate our complaints and protestations as long as they are not reflected in our actions or those of others. We see Trump attempt to accurately describe our circumstances and he is labeled a threat, with claims that his illustrations will actually CAUSE hate crimes and economic collapse.
We are in a sad place when truth becomes our greatest threat and we can only be “saved” by a corporate Government.
Fed Facebook site trolled:
To that end, if one searches for “The Board of Governors of the Federal Reserve System” instead of “Board of Governors of the Federal Reserve System,” he or she will be directed to a page with a post that refers to the Fed as “a group of banks running a national counterfeiting operation with the protection of the government.”
The post then links readers to the End the Fed campaign’s website.
http://www.usnews.com/news/articles/2016-08-25/facebook-foray-by-federal-reserve-feeds-trolls-as-jackson-hole-conference-kicks-off
I feel like it’s more productive to look at Real Final Sales.
RFS were 2.3% last quarter, that’s pretty good. I’m expecting another strong quarter this time based on the high NowCast.
4th Q we should be back to 1% growth.
I know a lot of people have a hard time swallowing the official numbers because they feel like the economy *should* be doing worse, but keep a few things in mind:
1. The government is running massive deficits, that adds to GDP
2. The private debt to GDP ratio is still growing
3. Population is still growing
Remember that Japan has achieved an average GDP growth of 0.8% over the last 30 years despite net private sector deleveraging and population decline. Considering that the US private sector is still taking on more debt and our population is growing, it makes sense that we would settle in to ~1.5% annual GDP growth.
“RFS were 2.3% last quarter, that’s pretty good”
I have a problem with the “real” part. In Q2 oil had an impressive rally. CPI (annualized) for quarter was 3.42%. BEA used a deflator of 2.22%. If CPI the deflator, RFS closer to 1%.
It will be interesting to see if BEA adjusts the deflator in this morning’s revision.
“Given thet GDP revisions go on for years, even decades, this is a total crap shoot”
Here, let me edit that for you:
Given that GDP revisions go on for years, even decades, this is total crap.
“This is a crap shoot. Revisions are amazing.”
but but Mark Zandi begs to differ ….
I would add that the economists at BEA (and elsewhere) can be really off at inflection points in the economy
The composition of GDP has changed continuously over time. Seeing the addition of prostitution and illegal drug sales, in Britain, as if that some how adds to the economy, indicates how desperate gov’t is getting to keep showing growth.
Developed nations no longer have population growth. That will be a huge factor in the lack of economic growth we see going forward.
Governments look for credit expansion as an indicator of growth. Credit is not going to expand if the population does not grow.
That’s one of the many, many reasons why GDP is practically worthless as an indicator of economic vitality.
There is an incredible amount of Capital Consumption going on out there, which is masquerading as “growth” in GDP figures.