I seriously fail to understand the GDPNow model in light of actual hard data. Let’s take a look at GDPONow, the actual data, and see if we can come up with a better estimate.
GDPNow Forecast: 2.9 percent — June 16, 2017
GDPNow Second-Quarter Tracking
Despite miserable housing numbers today, with negative revisions to last month, the GDPNow model still has residential investment positive albeit down from the initial estimate.
Starts will continue to add to GDP until they are completed, then consumers fill them with stuff. I fail to come up with residential investment adding to GDP.
For the second quarter, retail sales are up 0.05 percent per month on average. With two of three months in (one preliminary), retail sales are up a total of 0.1%, roughly 0.6% annualized. GDPNow is looking for a 2.19 percentage point contribution, essentially the same as its initial forecast.
There is only one month of data on business inventories (April), down 0.2%. Prior to the business inventory report, the Census bureau reported wholesale inventories were down 0.5%. I fail to see why inventories will add 0.76 percentage points. Unless inventories pick up, we are looking at a negative contribution.
I left all the other GDPNow numbers intact, but I have serious doubts about commercial construction as well.
- June 16: NAR Cites “Housing Emergency” as Starts Unexpectedly Dive 5.5 Percent: NAR “Befuddled”
- June 15: May Industrial Production Flat, Manufacturing Dives: Exploring the April Outlier
- June 15: Import Prices Dip, Export Prices Plunge
- June 14: Retail Sales Dive (And It’s Not Just Autos)
- June 14: Business Inventories Sink (And Why Shouldn’t They?) Yellen Still Clueless?
Except for one industrial production report, economic data has been miserable this entire quarter.
We are not quite halfway through the reports and there may be huge revisions either way. But as it stands, I cannot come up with anything close to 2.9%.
We may be lucky to beat 1.0% the way things are going.
Mike “Mish” Shedlock