The consensus 3rd quarter GDP estimates show U.S. economic growth may accelerate just before election day.
This prompted the Wall Street Journal to ponder the October Surprise?
But how can stronger growth be a surprise, if that is precisely what most economist expects?
October Surprise?
“Less than two weeks before Election Day, American voters could learn that economic growth has suddenly accelerated to its fastest pace in two years.”
Forecasts
- A of Friday, forecasting firm Macroeconomic Advisers projected a 3.1% seasonally adjusted annual growth rate for GDP in the third quarter.
- The Federal Reserve Bank of Atlanta’s GDPNow model on Thursday predicted a 3% growth rate.
- Oxford Economics on Friday also estimated the third quarter’s growth rate at 3%.
- Barclays on Friday predicted third-quarter growth at a more modest 2.6% pace.
FRNBY Nowcast
The Wall Street Journal left off the FRNBY Nowcast that stood at 2.8% and 1.7% for 2016:Q3 and 2016:Q4, respectively.
The date on those forecasts is September 9.
The New York Fed is currently in a blackout period because of the Fed FOMC interest rate decision on Wednesday, September 21.
Trend is Lower
The third quarter GDPNow forecast is 3.0 percent as of September 15, 2016. It has been trending lower. The “Blue Chip” economists forecast has been trending higher.
Inventory Build
The Journal article states “Many economists are predicting the report will show a pickup in growth after three straight quarters of lackluster expansion, fueled by decent-if-not-great consumer spending and the end of a five-quarter drag from lackluster business inventories.”
I question that thesis and the following chart shows why.
Inventory-to-Sales
An inventory build could happen, but the inventory-to-sales numbers do not support the idea.
For more details, please see Wholesale Sales Drop 0.4%; Inventory-to-Sales Ratio Back on the Rise.
Guess of the Next Nowcast Guess
Based on recent data, my guess of the next FRBNY Nowcast guess is 2.4% for third quarter and 1.4% for 4th quarter. We will find out this Friday.
On Oct. 28, 11 days before the Nov. 8 presidential election, the Commerce Department’s publishes its first (advance) estimate of gross domestic product for the 3rd quarter.
Meanwhile there’s 39 days for economists to change their minds as to what will constitute a “surprise”.
As it stands now, 2.8% to 3.0% is a consensus estimate, not a surprise.
Downward Surprise?
By definition, surprises have to be what most don’t expect.
I suspect 3rd quarter GDP will be closer to 2.0% than 3.0%. I will make a comparatively shocking prediction of 1.8%, subject to revision between now and the final guess everyone gets to make.
There’s still five weeks of economic data yet to come in.
If the inventory build occurs that economists expect, it will be at the expense of 4th quarter GDP.
No miracles are to be found in Janet Yellen’s hat.
Related Economic Reports
- Retail Sales Unexpectedly Dip 0.3% – Weakness Not Contained to Autos
- PPI Synopsis: Final Demand for Goods -0.4%, Food Prices Down, Obamacare Up
- Collision Course: Motor Vehicle Production +0.5%, Motor Vehicle Sales -4.4% Year-Over-Year
- Real Hourly Earnings Decrease 0.1%, Real Weekly Earnings Drop 0.4%, Hooray!
- Good News For Inflationists: Medical Costs and Rent Surge; Mini-Stagflation Coming Up?
Mike “Mish” Shedlock
Mish, if there is a surprise it will be an upward surprise. I am cynical enough to believe tge powers that be are going to do everything they can to drag Hillary across the finish line. Common sense doesn’t work in this scenario.
Problem is, faking *this* doesn’t matter. Think about it: the economy you see is the one that matters to your vote. Someone telling you everything is okay, everything is better *isn’t* going to affect your vote. What you see overwhelms what you hear.
A good october surprise is something you can’t invalidate: for example, news that we suddenly got Osama Bin Laden’s 14th son-in-law. Or whatever, because it’s also got to be something that matters to you. So maybe if suddenly we had a moon base on mars, or suddenly South Korea was bombing Alaska… or something.
When is the next recession going to happen? There is every reason to believe it will be within the next 2 years but I really didn’t expect this psuedo recovery to last as long as it has.
I think we can say there will 100% for sure be a recession in the next 4 years but I don’t know about the next 2.
For all practical extents, we are in a recession now. Just because a few at the top are providing enough financial activity through their massive wealth rewards from the FED, to SIMULATE any growth at all, does not mean that most or many of the rest of our society are seeing this.
What we are waiting for is NOT a recession, but a collapse. Possibly a collapse that will not be recoverable. Every aspect of the world’s economy is heavily leveraged, and if real instability occurs, it will domino throughout every financial aspect of the world. I believe this because I see little evidence that those running this carnival have any intention of backing away from their madness. They are convinced that any failure is only the result of not going far enough, more debt, more printing, more corruption (for our own good as we can’t HANDLE the truth).
You can bet however, that NO ONE (of importance) will have ever seen it coming. This is how they avoid any consequence for their actions. Plead ignorance and ultimately blame it on the public’s lack of intelligence to see their wisdom. After all, doesn’t everyone know you don’t need production when you can simply “create” money?
why can’t we have just a generic recession like the EU countries are having?
JDonley is correct. The “surprise” will be whatever they want it to be subsequently corrected some time after the election. The United States of Fraud and Corruption has lost ALL legitimacy. It’s just naked power now.
GDP growth for Q3 in POTUS election years since 1992
1992 … +3.7%
1996 … +4.1%
2000 … +4.1%
2004 … +3.4%
2008 … -2.8%
2012 … +2.5%
In 2012 fedgov spending +9.5% over Q2
Spending on all the elections + use it or lose it (september 30th end of fiscal year for fedgov) + Obama trying to help HRC + low deflator (BEA used one 2nd quarter that was 1% less than CPI) = not too bad (+2.8%?)
Tony- agreed. All they need to do is manipulate the inflation rate lower and GDP will go up. It also plays into their narrative of not raising rates as they aren’t meeting their inflation goals. Got to love them hedonics.
The only surprise will be an accurate prediction.
The only surprise would be the actual truth.
THE FED IS CLEARLY STACKING THE DECK WITH M2 MONEY SUPPLY. THE 13-WEEK ROC IS UP TO 7.9% FROM 5% AT END OF 2015, AND YOY 7.2% PER ANNUM–UP FROM 6%. TOTAL M2 MONEY SUPPLY IS UP SINCE THE END OF 2015–$717 BILLION, DEBT UP $1.359 TRILLION—–WHILE GDP IS UP A PALTRY $271 BILLION IN SAME PERIOD. DONALD TRUMP HAS CLEARLY GOT 3 ON 1—HRC, RHE FED & MSM….LET ALONE THE TURNCOATS IN HIS OWN PARTY…..GO DT 2016.
Even though the FED actions have not fixed any economic fundamentals yet,
And what actions they have taken have only enriched the very rich and predominantly the financial sector,
And the fact that these very same people are funding and endorsing Hillary,
IS no reason to suspect ANYTHING
REALLY
Here is the problem. Retail sales weak. Industrial porduction flat. Auto sales peaked. Restaurants are weak.
Only thing going for GDP is delete key and the easy ability to change a number of data points such as pce to make gdp look good.
No way anybody can follow an audit trail if there is none.
How much is two plus two, asked the owner of a company to people interviewing for controller job. The winner replied how much do you want it to be?
If it looks like Trump will win by a landslide, rendering any attempted theft of the election obvious, then the deep Zioglobalist state will switch to crisis-generation mode to make Trump more pliable during the immediate post-election period, when he will be most vulnerable.
Making things look rosier than they are will be the last thing on their minds.
Keep in mind that they have one more goal – to pass TPP during the lame duck session with about 100 D and 130 R votes in the House and 48 R and 10 D votes in the Senate.
Plenty of time for last ditch panicked efforts. Many of them we will likely not even know about until after the election. The media has no interest in highlighting the current administration’s activities.
Desperation has set in. “Trumps wants Hillary dead”, they say!
The government employees KNOW who butters their bread and it’s NOT Trump, so the numbers will be fudged to put the best face on this pig they can. After all, when was the last time anyone even lost their job for doing anything questionable. Hell if someone gets caught, they generally get promoted and retired with a massive payout. We have seen some pretty significant “revised numbers” in recent years and no one seems to bat an eye. Oops! Shit happens, right? You quite literally can’t believe ANYTHING you hear or read from our government, as there is NO CONSEQUENCE for lying…NONE.
“Less than two weeks before Election Day, American voters could learn that economic growth has suddenly accelerated to its fastest pace in two years.”
Are these financial writers that much deluded?! Because who in his right mind can think that the American voter believes any of the numbers that come from DC or Wall Street?!
Lies are specifically designed to appeal to people’s delusions. Most people WANT to believe everything is going to be Okay…up until the very last moment when reality is no longer deniable.
If I were president I would imprison ANYONE who predicts anything beyond the weather forecast for the next five days.
Our economy is now dominated by prognosticators who are funded largely by the casinos that are trying to lure “customers” into their doors. We see major price swings in the market within a given day due to gamblers reading every whiff of wind that crosses their nose, which, if it were only putting their life’s assets at risk, I would care not. BUT, that is not the case. They addicted gamblers who have cornered themselves into a lifestyle that pretty much eliminates any other viable career, will burn the entire planet down on a bet.
Sit back and watch.
We know it will happen.
Like a child harmlessly playing with matches doing no real harm to themselves, yet putting ALL of us at risk.
ALL leveraged bets should be outlawed..period. You can only risk what you have in your pockets. No naked shorts, none of this bullshit that has replaced investors with rabid gamblers.
Regardless of whether the numbers are BS (my opinion) or not, the idea that the majority, who are not part of the 1% or government employees have seen no economic benefit and will be further reinforced in the belief they have not kept up financially, and further motivated to go for change in the form of Trump. I just can’t see how the talking heads are so stupid or so in the tank for the left that they believe one more phony number that has no relationship to the average guy’s situation will sway them to embrace the stroked out kleptocrat. Nevertheless, they will be trying.
“I just can’t see how the talking heads are so stupid or so in the tank for the left that they believe”
Those who are not ideologically inclined are simply paid to believe. And just look at the amount of money the Hillary campaign is pumping into these media outlets. They are paid…well!
It will be a huge increase due to all this automation creating high paying jobs such as clerks and waiters.