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From 2.4% To 1.1% And Dropping - Q2 GDP Gets Closer To Reality With Each Passing Day
As we pointed out earlier today, today's latest deterioration in yet another overoptimistic assumption by the BEA, in the form of the balance of trade, means that the next GDP revision will likely be sub 1%, and may ostensibly drop to negative, confirming that the double dip, at least for NBER purposes, started sometime between April and June. Confirming our skepticism is JPM's Michael Feroli who now believes that real Q2 GDP is trending at a 1.1% rate, less than half the official 2.4%, which, as readers will recall was expected by a battery of Ph.D.-clad optimists to come out to 2.7%. Less than two weeks after the announcement, it becomes clear that the world's "smartest" economists were off by 60%. And we are confident this is not the end of the downward revisions.
From JPM's Feroli:
The trade balance widened out to $49.9 billion in June from $42.0 billion in May, as imports leaped 3.0% while exports slid 1.3%. The decline in exports was not particularly striking, as it followed a 2.5% increase in May. It was rather the increase in imports, which followed a 2.8% increase in May, that was more eye-catching. The surge in imports was even stronger in real terms: up 4.8% in June after a 2.9% increase in May, the strongest two-month run on record. This strength in real imports was mostly in consumer goods, which are up 15.6% over the last two months. Given this end-use product, it is not surprising to see Chinese imports still running strong, up 37% over a year-ago. This lift to imports may represent the last push of Chinese exporters ahead of the July 15 expiration of their VAT rebate.
The increase in the trade deficit was even wider than was initially assumed in the first print of Q2 GDP, and implies growth last quarter was about 0.3%-point softer than initially reported (there was a partial offset in the capital goods balance). Together with the earlier-reported June inventory data, our best estimate is that when revised Q2 GDP is reported on August 27, it will look closer to 1.1%, down from the 2.4% initially reported. While this is a disturbingly low number, it should be pointed out that very little of the incoming data imply downward revisions to domestic final sales. The fact that inventories were weaker last quarter implies, if anything, more support for output gains in the third quarter. To a lesser degree the same could be said about the strength in import growth last quarter, provided that growth was front-loaded and we get some payback in the form of weaker import growth in Q3.
The data do raise one puzzle: last quarter real imports were up at a 23% annual rate and domestic manufacturing output was up at an 8% pace. At the same time, core retail sales advanced at less than a 2% rate and inventory building now looks weaker than the quarter before it, so its not obvious where all these goods are going.
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[Another] Downward revision, bitchez!
Baah, these guys are behind the curve. Consumer metrics already has the US economy contracting at a 4.5pc rate as of today. So what's the need for JPM and the BEA again?
When does the run on money markets begin?....I smell a panic coming....
Looking for a silver lining again. And then the comment about how confusing and obtuse the numbers are. We should buy then, JPM?
How's your GDP print looking now, Leo?
Is the ECRI still in denial as well?
the ECRI comes out Friday morning, and it will show the same as consumer metrics... it is currently at below -10%...
...sniff sniff. Me smells stagflation.
People, please remain calm. The captain has assured me personally and in the strongest possible terms that there is no way a boat of the Titanic's size and construction can possibly sink.
And to prove that, they are currently rearranging the deck chairs.
is there actually any possibility that America could be going down?
Faster than a bribe-loving ex-senator's float plane!
Did someone saw the fast drop that just happen on the ES. HFT aren't happy 17h09
Good thing schumer got his letter out in time.
Surprised at calling Cramer out, Tyler. His grizzled mug has been showing up all too often on ZH big banner ads, lol.
Think today's sell off was because "they" knew CSCO would blow up?
Time for the market to continue factoring in a double dip?
What recovery? From dead to comatose?
How do markets usually factor in big tax hikes 2011?
Any thoughts on higher interest rates putting more money in savers pockets?
It's going to be a bad Xmas.
When the bond market unwinds will some of that cash go into gold? I vote yes.
Why aren't higher yielding stocks doing better?
I disagree with just about everything the Obama Administration has said or done, yet, would the state of the world's financial markets be much different under a Conservative Administration? Or is the state of the world now the inevitable result of 20 years of easy money and too much debt?
Funny how silver is unattractive to big money because it is so cheap that's it difficult to store big money there, while gold is attractive because its easier to store big money there.
The stock market won't be allowed to fall apart, really, like March '09 unless there is the perception of systemic risk, again.
"Think today's sell off was because "they" knew CSCO would blow up?"
One way to tell would be to look at the intra-day action. Looks pretty flat until after close. 23.8-ish. Their 58 cent drop (-2.39%) seems to have followed the rest of the tech stocks.
I think the selloff was a minor correction to get some insititutionals into their call prices. Anyone look that up?
I do believe last nite I posted that spx would go down hard and fast....kinda like timmy boy on the diet coke know it all.
Oh My God, it's DEADHEAD!! Look everybody, it's deadhead.
I just knew GS couldn't hold you hostage for very long before you would slip out of the hand cuffs and make your escape.
Welcome back DH. We most certainly missed you. I did a double take on your avatar. At first I thought someone had stolen it. Nice to see your sorry ass slumming around ZH once again. :>)
Sumbitch.....a visit from the King. How ya' ??
hey CD (thanks for the emails!) and hey rainman.....been reading ZH every day, just had a spell wherein I've kept my trap shut, plus a new job (1/3 of previous income but the wife, kids, and I are okey dokey).
Looks like the 1930s all over again to me!
Damn, like a real live dress up job....?? That would shut my trap, too. Luckily, Mrs. Rainman's job is the real live dress up job. But it's all good. Some nights I ask her how her day went, then tell her to get busy sucking her wife's .... !! ;>))
Glad you are well, pal.
Has there been another quarter where the estimates for a quarter were taken down so quickly after being released by the BEA? And by this much?
And we are now ruled by the "world's smartest economists". This (our whole financial fess) is and has always been about power. The GOP pushed for the repeal of Glass-Steagall (more bank money for elections), the DEM's pushed everyone and their mother to buy that house (to buy votes of people), Alan Greenspin lowers interest rates to nutin (the power of arrogance), Dodd and Franks push GSE's to the max (more bucks for reelection).
Today it is all, all, all about power. Once the end justify the means ... any lie will do. It doesn't have to be a good lie. Wall Street was brilliant when they created CDS's and CDO's and then declared that derivatives were too complex for the public to understand and so to get in on the next big move you have to send your dough to GS and then 'trust me'. The Gov can even redefine 'unemployment' to only those who are receiving unemployment checks from the states and inflation numbers including only those things that don't go up.
I'm so pissed that my kids will have to pay for all this mess.
They didn't call em "masters of the universe" for nothing.
The critical fail was the decision to take leave of reality and rely on deficit spending through twin deficits to substitute for economic growth. As you aptly put it, it was all about power: to "create money" just because we could. It was a very, very short sighted policy. It was as cynical as the 1980s creed that "Greed is Good". It has imperiled the country and global stability.
Great point: in 2000-2010, "Greed is Good" but "Debt with Other Peoples Money" ... DOPM is better
See, the truth does come out. Only the first, second and tenth time that it does, it's always explained away or dismissed.
"See, the truth does come out. Only the first, second and tenth time that it does, it's always explained away or dismissed."
And it is always further back in the paper/magazine too. Good news up front, restating earnings, indices, etc. - small type in back, buried under title of "corrections and errata".
Q2 GDP may be close to zero when all is factored in. And yet at the end of Q2 crude oil prices were at boom time levels, food inflation was getting under way, most raw materials were closing in on record highs, intermediate goods prices were rising and credit card rates were at 18%.
Wham, bam. Deflation hits net worth, incomes and margins while pernicious inflation erodes purchasing power. You don't need a hyper level of inflation or deflation if both are at work simultaneously in different sectors of the economy. It's the gap that widens and crushes consumers and business.
Well. After everything that's happened today, and today's been long, I am much richer and much drunker than last night. Also there is the growing conviction that economists know nothing and are admitting they know nothing (Bernanke, Merv the Swerve) so loudly even the MSM are aware of the issue.
Could be either of these things, but in my happy head the following was the funniest post today:
LMAO! Timmy dude where's my imported chinese shit? Dude my girlfriends gonna kill me! I need that stuff! I dont know what it is or waht its for but she wants it. Timmy, dude, please?
Seriously, is this the point where the unicornomists (my new word, copyrighted) get found out?
"Seriously, is this the point where the unicornomists (my new word, copyrighted) get found out?"
Yup, after enough people step in the skittles, questions will be asked......
Just as we crossed the Gregorian calendarical line between April and June, the drugs started kicking in.....
when will it be officially downgraded
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