GDPNow and Nowcast Estimates Follow Similar Track This Quarter

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The current GDPNow and Nowcast GDP estimates are 1.3% and 1.5% respectively.

For a change, the GDPNow and Nowcast forecasts for GDP are on similar tracks this quarter.

The base forecasts are 1.3% and 1.5% wheras we have seen spreads well over a full percentage points in previous quarters.

Real Final Sales

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

Rate Cut Odds

On the basis of real final sales there should not be a rate cut this month, assuming GDPNow is accurate, but it might not be.

Nonetheless, despite a strong jobs report July Rate Cut Odds are Still 100%.

Inventories

I am skeptical of the GDPNow real final sales estimates 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 and jobs have been volatile for five months as well.

Mike "Mish" Shedlock

Comments (5)
No. 1-5
Matt3
Matt3

I think the rate cut has more to do with positioning of the US with respect to other countries debt. With most of the EU at zero or lower, why should the US pay much? Dropping rates would help finance government debt. The Fed doesn't care about people that save. Only those that spend.

conscript
conscript

In eastern Massachusetts, the economy 'seems' to be be booming. Too much so. People are throwing money into the real estate market, and the 'flippers' are in full swing. Reminds me of the run up to 2007/2008. The trades are fully employed; try finding anyone to work on small jobs. Perhaps I am looking at the trees for the forest, but things seem to be a little too good. Retail is another matter. I am starting to see more 'for lease' signs than a few months ago. We are are bombarded with a huge volume of mail and online promotional info. It is apparent there is some significant cost cutting going on. Go figure.

numike
numike

What’s really happened over the past 10-years is central banks printed lots of lots of money and pumped it into the financial system through QE [Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to increase the money supply and encourage lending and investment.] What happened to that money? Well, most of it stayed in the system, and has been invested in financial assets – NOT the real economy. And that is where the money continues to reside – QE has inflated the value of all financial assets by boosting bond prices via dangerously low rates and converting equity into debt (thus pushing up equity prices through buybacks). And, of course, markets have spotted and coat-tailed the effect… meaning the banks and hedge funds and owners have received lots of dividends and bonuses while workers have seen wages stagnate/fall and workers rights reduced in the new gig economy.

Long-term its unsustainable. But why would the party ever end? Because no one is going to get paid a pension from negative yields to infinity. And politicians and voters notice the rich getting richer while western economies flatline as the financial party goes on and on and on. Resentment is a terrible thing to behold – parliaments and corporate princes’ palaces will burn fiercely.

So, there you are, the stark binary choice. Its your/our choice pick one:

Central Banks take the medicine now and steer the global economy back to normalization, which means a sharply corrective stock market crash followed by recovery, rising rates (and a bond market wobble). 5 more years of pain! Then everything back to normal. Or They keep fueling the bubble, till its negative infinity rates and financial inflation means a single Tesla share is worth more than California… And the resentment is such the real world explodes and it all ends very badly.. Loads more pain for longer..

Bam_Man
Bam_Man

"Greatest Economy Ever". LOL...

gflop
gflop

What is the historical accuracy of these models?

I haven't looked in several years, but the studies I read back when indicated the model track records was very poor. And their biggest errors occurred during so called "turning points" -- when the economy was entering a recession or starting a recovery.

Presenting these models without any context about their historical accuracy isn't very useful.