Weakness in ISM Services and Manufactured Goods Hits GDPNow Forecast

Tyler Mitchell By Tyler Mitchell Jul4,2024 #finance

The GDPNow forecast took another dip today with the key item, Real Final Sales, now at 0.9 percent.

Data from the Atlanta Fed, chart by Mish

GDPNow Chart Notes

  • The base forecast, and the one most observers watch but shouldn’t, is the blue line above.
  • Real final sales is the bottom line estimate of the economy.
  • The difference between the two line is Change In Private Inventories (CIPI) which nets to zero over time.
  • RFS is not always below the base forecast. That just happens to be the case this quarter.

Here is the latest GDPNow Estimate from the Atlanta Fed.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 1.5 percent on July 3, down from 1.7 percent on July 1.

After this morning’s releases from the US Census Bureau, the US Bureau of Economic Analysis, and the Institute for Supply Management, the nowcasts of second-quarter real personal consumption expenditures growth and second-quarter real gross private domestic growth decreased from 1.5 percent and 6.9 percent, respectively, to 1.1 percent and 6.5 percent, while the nowcast of the contribution of the change in real net exports to second-quarter real GDP growth increased from -0.94 percentage points to -0.78 percentage points.

The report is much easier to understand with a focus on the change in contribution which GDPNow creator Pat Higgins did in the second half of the last sentence above.

Contribution Change From Last Report

  1. PCE Goods: -0.12 from +0.05 to -0.07
  2. PCE Services: -0.15 from +0.97 to +0.85
  3. Gross Private Domestic -0.06 from +1.20 to +1.14
  4. Change in Net Exports: +0.16 from -0.94 to -0.78
  5. There were other very minor changes

The sum of the first four items is -0.17 percentage point. That’s reflected in the 0.2 drop in the forecast.

What Happened?

In short, two bad reports and one good one, all from the perspective of what the Model expected.

Point #4 is interesting. The trade deficit rose from $74.5 billion to $75.1 billion but the net export contribution increased. This is because the model anticipated an even worse forecast.

I knew trade was a wildcard when I made this Tweet ahead of the report.

The big dive turned into a smaller dip due to the model’s positive reaction to the trade deficit. But I was very confident the model did not expect the dismal ISM Report or the dismal manufacturing data.

Points #1, #2, and #3 are covered in two reports earlier today.

Severe Weakness in the Latest Manufactured Goods Report

Please see Severe Weakness in the Latest Manufactured Goods Report

Also see The Services ISM Plunges Into a Recession Forecasting Contraction

This is very recessionary data.

Tyler Mitchell

By Tyler Mitchell

Tyler is a renowned journalist with years of experience covering a wide range of topics including politics, entertainment, and technology. His insightful analysis and compelling storytelling have made him a trusted source for breaking news and expert commentary.

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