Today we say the results of the allegedly “very positive” August new home sales report in which sales declined 7.6%.
Total construction spending in August declined 0.7% and is now negative year-over-year. For discussion, please see Construction Spending Unexpectedly Dives 0.7%, Last Month Revised Lower.
With the construction spending report, the Atlanta Fed GDPNow Model estimate for 3rd quarter GDP continued its plunge, but rate hike odds in December rose.
Latest forecast: 2.2 percent — October 3, 2016
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 2.2 percent on October 3, down from 2.4 percent on September 30. After this morning’s construction spending report from the U.S. Census Bureau, the forecast of third-quarter real nonresidential structures investment growth fell from 8.4 percent to 4.7 percent and the forecast of third-quarter real government spending growth declined from 0.8 percent to 0.1 percent.
GDP Estimates
- 3rd Quarter GDPNow October 3: 2.2%
- 3rd Quarter Nowcast September 30: 2.2%
- 3rd Quarter Markit September 27: “Around 1.0%” (see first link below)
- 4th Quarter Nowcast September 30: 1.2%
With today’s report I expect the next Nowcast to look something like 2.0% for 3rd quarter and 1.1% for fourth quarter.
Meanwhile rate hike odds are actually rising.
Fedwatch Rate Hike Odds
Related Articles
- Real GDI Provides Strong Recession Warning
- Markit Chief Economist on Services Flash PMI: “Economy Growing Around 1% Again in 3rd Quarter”
- Convergence: GDPNow 3rd Quarter Estimate Dives to 2.4%, FRBNY Nowcast Remains 2.2%
- Heavy Truck Sales vs. GDP: Sales Plunged 29% in August from Year Ago
- Conversation With Atlanta Fed on Today’s GDP Revision and Its Impact on 3rd Quarter GDP Estimates
Given the process of recession determination is months after the fact, this is now a distinct possibility, assuming of course the Fed does hike.
My expectation, however, is the Fed will not hike. These economic reports are starting to look very ugly and growth expectations in Fed models have been plunging fast.
Mike “Mish” Shedlock
They do need some room to move down. Recession = Eventual NIRP anyway you look at it.
Consider that the Fed does not want to hike now because: a) it doesn’t want to be viewed as trying to influence the election in any way, or, b) it doesn’t want to hurt HRC’s chances. Politically, a hike after the election makes sense.
When Trump wins
Rates will be hiked
Market will tank
Trump will be blamed
All you need to know….write on your forehead….no need to cut & paste this one.
Book It!
Most likely…depending on whether Deutsch Bank collapses first….
Mish I would bet that a December hike may b determined by what we c with the rest of the economic stats this week most especially the non farm payroll report. I think it may have been Ms Yellen herself who said it was not the Fed’s responsibiliy to hold up the stock market. This is something I have a hard time believing since it seems like every time n the last seven years the market sells off really hard someone with very deep pockets comes in the last 30 minutes with whatever it takes to hammer the VIX back down to rally stocks on the close, other than the time we had a 10 percent correction.
“Ms Yellen herself who said it was not the Fed’s responsibility to hold up the stock market. ”
One can assume if she said that, the opposite is true. In keeping with Trader Joe’s theory I add “after Hillary loses the election”
A great way to ensure economic chaos
Regards
Jim LeGault Sent from my iPhone
Go ahead, Janet. Burn it all down. Do it in honor of ‘black lives matter’. They burn their own neighborhoods down….burn your own down, too. Think of it as paying penance for that awful white mop on your head.
Anyone that thinks “reported economic activity” has any linkage to what the Fed does with rates may as well go watch cartoons and play with his or her self.
Trump is going to get elected. The economy will suddenly go to hell and it will be all his fault. Can anyone else see this coming.
Printing is what caused the current situation in the first place. Additional printing just misallocates additional capital, slowly turning the country into a banana republic. Printing causes sub par GDP Bankers react to sub par GDP by printing additional sub par GDP. Then bankers react to the additional sub par GDP by printing yet more sub par GDP.
Insanity is doing the same thing and expecting different results.
Printing, along with most of the rest of government, has rendered GDP a pretty much useless metric for estimating the health of an economy. The idea of measuring spending to estimate well being, “kind of probably” works OK as long as virtually all spending is undertaken in a discretionary fashion by an economy’s actors, and the relative cost of spending vs non spending is is not manipulated. “Kind of probably”, since it still rests on faith in some informal version of a lifetime income hypothesis: “The wealthier you are/feel the more you spend, hence the more you spend, the wealthier you are, hence a greater GDP, the wealthier the economy.”
But nowadays, more and more spending is not driven by discretionary decisions by individual actors, who bear the full brunt of each spend or save decision. Instead, the spending is now mandated. Obamacare the latest and most hyped, but most government spending by now falls in the same category. As does nominally “private” spending to comply with an ever denser jungle of harebrained legal requirements.
So, while gaming GDP with government spending, mandates to spend, printing, debasing and interest rate manipulation to render saving less attractive, may succeed in pumping up the headline number, the headline number itself no longer gives you much useful information about the well being/utility of the economy. Instead, it has become, like “peace” and “equality”, nothing more than another childish totempole for dimwitted progressives to rally around. One they don’t understand, don’t have the aptitude to ever even pretend to understand, but are still all too happy to stomp their boots all over others’ face in support of Dear Leader over.