GDPNow and Nowcast Estimates Continue Similar Second-Quarter Track

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Only 0.2 percentage points separate the GDPNow and Nowcast estimates for the 2nd quarter. But what about inventories?

The GDPNow and Nowcast forecasts for GDP are on a similar track this quarter.

The base forecasts are 1.6% and 1.4% respectively, whereas spreads were frequently over a full percentage point in previous quarters.

Real Final Sales

Real final sales represent the true bottom line estimate for the economy. The rest is inventory adjustments that nets to zero over time.

A bottom-line GDP print of 2.6% is nothing to sneeze at.

Rate Cut Odds

Based on real final sales, there should not be a rate cut this month, assuming GDPNow is accurate, but that's quite an assumption.

Meanwhile, rate cut odds are 100% and Half-Point Rate Cut Odds Explode to 71%.

The Fed tried to walk back expectations of a 50 basis point cut on Friday, but 25 points minimum is a given.

Inventories

I am skeptical of the GDPNow real final sales estimate because of a buildup of inventory.

On July 3, I commented the Manufacturing Sector is Rolling Over But Inventories Keep Piling Up.

Meanwhile, the BIS warns of Diminishing Returns of Monetary Policy, Zombies, Junk, Complacency.

The crosscurrents are very strong this month

Mike "Mish" Shedlock

Comments (7)
No. 1-5
Sechel
Sechel

The Fed can't justify a cut. If they do it will clearly mean that browbeating works.

And Trump isn't the first to use this tool. Nixon brow beated the Fed as well

Realist
Realist

Even if the Fed cuts, it won’t matter much to the economy, though it may help the markets. The economy is still headed for years of slogflation.

Carl_R
Carl_R

Rate cuts and increases take about a year to impact the economy anyway. That's why the Fed usually cuts at the wrong time, and increases at the wrong time. It would be far better if they just quit trying to fine tune things, and focused on maintaining an orderly management of the money supply.

lol
lol

Borrowed (printed) 16 trillion in the last decade and nothing (zero)to show for it.

Bam_Man
Bam_Man

Already in "Stagflation". The Guvvamint's inflation figures are under-stated and GDP figures over-stated.