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It Begins: JPMorgan Lowers Q3 GDP

Tyler Durden's picture


By now it is no secret that Q2 GDP is a complete scratch, likely coming at under 2%, meaning that the economy contracted in real terms (even though back in January every Wall Street economist expected a 4% growth rate at this point). Needless to say, those who have been reading Zero Hedge know that Q3 and Q4 will suffer the same fate. Everyone else who has been holding out in hope that some mythical and mysterious car buying force will appear out of somewhere and can now relax. It isn't. Here is the first official Q3 GDP downgrade, courtesy of JPM's Michael Feroli. We fully expect every other clueless Wall Street lemming to follow suit in minutes.

Read em and weep:

We are revising down our projection for the growth rate of real GDP in Q3 from 3.0% to 2.5%. Obviously there's not a whole lot we know right now about third quarter growth, but one thing we do know is that the composition of second quarter growth implied a fairly large amount of inventory building, which should weigh some on output growth in the current quarter. Given the data was have through May it appears real inventories were built up last quarter at around a $65 billion annual rate; this is a fairly strong pace of stockbuilding even in a time of healthy final demand growth, but of course final demand growth has been quite soft as of late. The suspicion that the inventory building was unanticipated by business, and unwanted, receives some validation in the customers' inventories index in the June ISM survey, which reported an assessment that inventories were getting to flush levels.
We still expect that Q3 growth will be better than Q2 growth -- which is currently tracking a little to the soft side of our 2.0% estimate -- as we still see the two positives for Q3 largely intact: a rebound in vehicle production and a decline in energy prices freeing up some consumer purchasing power. To be sure, both of these positives are looking a little less shiny than they did a few weeks ago. Revised Ward's vehicle production schedules are still boomy, but less so than the previous estimate (CSM schedules will be released tomorrow), and the decline in retail gas prices seems to have stalled for now. Nonetheless, Q2 is a fairly low hurdle to cross, and we still believe that Q3 can beat the prior quarter's growth number.


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Thu, 07/14/2011 - 13:02 | 1456577 carbonmutant
carbonmutant's picture

Poor Chinese...

Thu, 07/14/2011 - 13:19 | 1456638 TruthInSunshine
TruthInSunshine's picture

It's all good.

TARP, TALF, QE1, QE2, QE2.5 all had the obvious effect of creating high wage jobs by the tens of millions, helped get equity valuations back to true FMV, helped get bonds and treasuries back to true FMV, stoked strong and sustained consumer demand for goods and services, achieved optimum inflation stability, and rejuvenated real estate asset values.

So QE3 is a no brainer. Who would possibly not want to see it? Just make it much larger.

And hey, look -

Only 1.7 million additional homes have gone into foreclosure in JUST the first 6 months of 2011, but there would have been 2.7 million additional homes going into foreclosure in just these 6 months if it weren't for 'paperwork problems,' so, just like the debt, these foreclosures will keep being kicked like an oxidized can down the street, until there are 15 million (or more) homes in foreclosure, piled up, like steaming heaps of cow dung.

What great progress!


Foreclosure Glut Pushes Filings Into 2012

Thu, 07/14/2011 - 13:41 | 1456749 Mactheknife
Mactheknife's picture

Obviously there's not a whole lot we know right now about third quarter growth,

Nuff said.

Thu, 07/14/2011 - 13:04 | 1456588 buzzsaw99
buzzsaw99's picture

Cut goobermint spending, that will be good for the gdp. lulz

Thu, 07/14/2011 - 13:29 | 1456686 CrashisOptimistic
CrashisOptimistic's picture

Don't cut it, and rates go up because no need for QE3, and GDP falls.

Thu, 07/14/2011 - 13:37 | 1456720 buzzsaw99
buzzsaw99's picture

everyone keeps saying "rates go up". i don't think it means what they think it means. lololololol

Thu, 07/14/2011 - 13:46 | 1456786 HowardBeale
HowardBeale's picture


Thu, 07/14/2011 - 13:08 | 1456602 Jambo Mambo Bill
Jambo Mambo Bill's picture

Gold and silver pull back soon?

Thu, 07/14/2011 - 13:17 | 1456637 MFL8240
MFL8240's picture

Just a game unless you want confetti?

Thu, 07/14/2011 - 13:09 | 1456603 cougar_w
cougar_w's picture

Legalize pot.

Problem solved.


Thu, 07/14/2011 - 13:12 | 1456616 Cognitive Dissonance
Cognitive Dissonance's picture

Are the sisters in agreement? How do they feel about their prey being stoned when consumed? Is there any pass through or other possible side effects? :)

Thu, 07/14/2011 - 13:27 | 1456639 cougar_w
cougar_w's picture

Diamond doesn't care about pot. Has no effect. And Fortran doesn't injest anything other than blood and she lacks a proper nervous system anyway.

However we do keep Diamond out of the licorice. My God, that woman, it's worse than catnip. You want to have a "nice time" with Diamond, buy her about three mugs of licorice spice tea and look out cuz it's eazy sleazy.

She claims it has no effect on her. Denial -- so ugly.

Thu, 07/14/2011 - 13:32 | 1456698 Dagny Taggart
Dagny Taggart's picture

...and when does that chapter get published?

Thu, 07/14/2011 - 13:41 | 1456753 Cognitive Dissonance
Cognitive Dissonance's picture


Don't corner the cougar if you want to keep your blood on the inside.

Just sayin'

Thu, 07/14/2011 - 13:21 | 1456651 carbonmutant
carbonmutant's picture

Oh... interesting...

Thu, 07/14/2011 - 13:30 | 1456691 Cognitive Dissonance
Cognitive Dissonance's picture

Yes, our cougar_w is a very interesting author.....and a mad scientist to boot.

Please keep your hands and feet inside the car at all times. And thank you for playing the home version of The Zero Hedge Effect.

Thu, 07/14/2011 - 13:13 | 1456622 Iriestx
Iriestx's picture

I dunno, the Teleprompter-in-Chief said that the reefer is more dangerous than heroin.

Thu, 07/14/2011 - 13:39 | 1456729 Problem Is
Problem Is's picture

Reefer says the Teleprompter-in-Bitch is more dangerous than heroin...

Thu, 07/14/2011 - 13:23 | 1456655 carbonmutant
carbonmutant's picture

There a lot of people in this State that agree with you...

And Jerry desperately needs the money...

Thu, 07/14/2011 - 14:17 | 1456909 HITMAN56
HITMAN56's picture

+10000 coug

Thu, 07/14/2011 - 13:09 | 1456605 Cognitive Dissonance
Cognitive Dissonance's picture

Everyone else who has been holding out in hope that some mythical and mysterious car buying force will appear out of somewhere and can now relax.

I might not be in the market for a new car, but I've been putting off replacing the water pump in the old jalopy. If I changed that sucker would that help out?

Thu, 07/14/2011 - 13:12 | 1456615 cougar_w
cougar_w's picture

For the love of God YES!!1! Do it man!

Oh and the air filter too while you have the hood up. Everything helps.

Thu, 07/14/2011 - 13:38 | 1456728 Threeggg
Threeggg's picture

While you have that waterpump off do yourself a favor and change the timing chain.

All steel no Teflon .........................

Thu, 07/14/2011 - 15:59 | 1457308 gmrpeabody
gmrpeabody's picture


And since they had to pull the front and top half of the engine, you might as well replace that thermostat and all the fittings. That should get you close to the $1500 min charge at most dealer service depts.

Oh ya... and have them replace the plugs while they are exposed, or face taking that engine apart again in 2 years.

Be sure to pop the hood and make sure they tightened the radiator cap back down BEFORE you drive that expensive repair home (jump you f--kers). 

Thu, 07/14/2011 - 14:14 | 1456896 Abitdodgie
Abitdodgie's picture

Careful with HOT particles in the air filter

Thu, 07/14/2011 - 13:12 | 1456617 Josh Randall
Josh Randall's picture

I thought eating peas was the key to this whole mess, what am I missing ? 

Thu, 07/14/2011 - 13:21 | 1456650 Cognitive Dissonance
Cognitive Dissonance's picture

Peas were yesterday. Water pumps are today.

Keep up fool.

Thu, 07/14/2011 - 13:24 | 1456665 carbonmutant
carbonmutant's picture

Sometimes... lol

Thu, 07/14/2011 - 13:25 | 1456671 Problem Is
Problem Is's picture

Mr. T says chain sawin' trees in rich white folk's neighborhood be today... fool...

Thu, 07/14/2011 - 13:34 | 1456705 Cognitive Dissonance
Cognitive Dissonance's picture

The papers called it the 'Lake Forest Chainsaw Massacre.' Arborists were stunned.

Thu, 07/14/2011 - 13:40 | 1456743 Problem Is
Problem Is's picture

Classic T pissing off Obummer's future benefactors...

Thu, 07/14/2011 - 13:49 | 1456804 Cognitive Dissonance
Cognitive Dissonance's picture

A Chicago native no less.

Of course he never really was one of 'them' because he didn't come into his money honestly (meaning he didn't steal it) but rather earned it by being a TV star.

Yuck! How pedestrian. And all that Gold and stuff. The horror.

Thu, 07/14/2011 - 15:06 | 1457158 TruthInSunshine
TruthInSunshine's picture

Cognitive Dissonance, you must buy a new General Motors vehicle within 30 days from 7-14-2011.

If not, you will be targeted for elimination.

***This is an automatic relay of DHS Insta-Alert Directive sent to all known contacts of suspected emerging rebel leader 'Cognitive Dissonance', garnered through Program Ping-Loop-Triangulate. Please forward to suspected emerging rebel leader Congitive Dissonance immediately***

Thu, 07/14/2011 - 15:25 | 1457210 Cognitive Dissonance
Cognitive Dissonance's picture

Now that's creepy.

You can have my loan signature when you forge it from my cold dead fingers. Good luck getting the loan paid then.

Oh wait, that's right. You don't care about repayment.

Thu, 07/14/2011 - 13:15 | 1456629 the not so migh...
the not so mighty maximiza's picture

don't forgot the spark plug hose

Thu, 07/14/2011 - 13:21 | 1456643 Problem Is
Problem Is's picture

Jalopy repairs... Sunk cost, remember?

Wait for Barry Soetoro's new, Stevie "The Rat" Rattner stock boostin', shovel ready stimulus project... drum roll please...

Cash4Clunkers II...

Coming to an inventory stuffed and overstocked GM dealer near you...

Thu, 07/14/2011 - 13:20 | 1456648 fuu
fuu's picture

I just replaced the two tanks on my truck. Bought 'em through Amazon too so that should have helped GDP some what.

Thu, 07/14/2011 - 13:25 | 1456672 cougar_w
cougar_w's picture


A real 'Merican would have just gone out and bought two trucks.

Thu, 07/14/2011 - 13:37 | 1456721 Dr. Richard Head
Dr. Richard Head's picture

...on their credit card or through a HELOC. Perhaps a loan from their 401K? 

My wife is turning tricks to keep bread on the table.  At least that is what she told me.

Thu, 07/14/2011 - 13:39 | 1456741 cougar_w
cougar_w's picture

She's a keeper!

Thu, 07/14/2011 - 13:43 | 1456769 Cognitive Dissonance
Cognitive Dissonance's picture

As long as the money keeps coming in don't ask too many questions.

Thu, 07/14/2011 - 13:44 | 1456774 fuu
fuu's picture

Damn got it wrong again.

Thu, 07/14/2011 - 13:51 | 1456811 slewie the pi-rat
slewie the pi-rat's picture

yeah.  didn't you mean to say you replaced yer truck w/ two tanks, fuu? 

Thu, 07/14/2011 - 13:56 | 1456833 Cognitive Dissonance
Cognitive Dissonance's picture

China is currently in an upgrade cycle so there are some great used deals out there.

Thu, 07/14/2011 - 14:17 | 1456908 foxmuldar
foxmuldar's picture

Do they come fully loaded?

Thu, 07/14/2011 - 14:23 | 1456929 Cognitive Dissonance
Cognitive Dissonance's picture

Not only do they come fully loaded (GPS Nav not included, but all the high velocity rounds you want) but they will be delivered to any major port on the East or West Coast of America no extra charge.

Don't worry about Homeland Security halting the shipment. They are too busy groping Grandma to care about a few used tanks.

Thu, 07/14/2011 - 14:25 | 1456944 foxmuldar
foxmuldar's picture

I bet Holder can sell a few of them to the drug cartels. Just add them to the Fast and Furious program. Then blame it on the local gun shops.

Thu, 07/14/2011 - 14:23 | 1456935 foxmuldar
foxmuldar's picture

Can I get one in red, with blue stars?

Thu, 07/14/2011 - 15:38 | 1457247 fuu
fuu's picture

err yes yes that's it

Thu, 07/14/2011 - 13:26 | 1456675 carbonmutant
carbonmutant's picture

Auto parts sounds like a good equities play..

Thu, 07/14/2011 - 13:43 | 1456767 Problem Is
Problem Is's picture

When the Bernanke Buck Collapses
The new currencies in order of liquidity will be:

  1. Cigarettes...
  2. Booze...
  3. Ammo...
  4. Silver coins...
  5. Auto parts...
Thu, 07/14/2011 - 14:22 | 1456927 foxmuldar
foxmuldar's picture

the government is broke. No more government buying of chevyvolts or GM vehicles.

Thu, 07/14/2011 - 13:10 | 1456609 Anjum
Anjum's picture

Let me get this straight ... they downgrade Q3 GDP estimate as 'there's not a whole lot we know right now about third quarter growth' .. but keep the 4Q11 and thereafter estimates intact that they supposedly know more about ?? genius !

Thu, 07/14/2011 - 13:10 | 1456610 TooBearish
TooBearish's picture

Joey L upgrading because its too low

Thu, 07/14/2011 - 13:11 | 1456611 machineh
machineh's picture

Q2 GDP is a complete scratch, likely coming at under 2%, meaning that the economy contracted in real terms.

This statement would be true if 2% were nominal growth. But it's real growth, with inflation already subtracted.

'Economy contracted' means real growth less than zero ... unless you disbelieve the GDP deflator (a different issue).

Thu, 07/14/2011 - 13:15 | 1456620 Problem Is
Problem Is's picture

JPMorgan Lowers Q3 GDP
That's okay... I've long since lowered my estimate and expectation of JPM and
one Jamie "Shoe Shine Boy" Dimon...

Gimme a shine, Jamie...

Thu, 07/14/2011 - 13:28 | 1456623 hedgeless_horseman
hedgeless_horseman's picture

I am sure that "CNBC permaguest Joe LaVorgna" is busy with









to his H2 revision from last year.

Thu, 07/14/2011 - 13:14 | 1456626 Dr. Richard Head
Dr. Richard Head's picture

And the sky is blue. 

Thu, 07/14/2011 - 13:18 | 1456640 props2009
props2009's picture

Graphic on News of the world. Why people believe this man will be back

Thu, 07/14/2011 - 13:34 | 1456707 bugs_
bugs_'s picture

corporations to hoard even MORE cash!

need to do a corporate fear index based on these cash hoards.

Thu, 07/14/2011 - 13:38 | 1456732 oldmanagain
oldmanagain's picture

We have so screwed over our econ figures that they are almost getting worthless.  This includes earnings, tax paying, GDP, inflation, you name it.  Let alone failing to get a handle on the derivatives.

What is left is trend charts but stops in the HFT age are worthless.

The NYSE went overseas today.

The Pubs are wanting to have a no deficit budget.  Balanced not by taxes, but loss of programs, research, etc.

The only good news is Newscorp.

Thu, 07/14/2011 - 13:44 | 1456770 ptoemmes
ptoemmes's picture

Compare/contrast to words not yet cold from The Bernank's lips:


...In light of these developments, the most recent projections by members of the Federal Reserve Board and presidents of the Federal Reserve Banks, prepared in conjunction with the Federal Open Market Committee (FOMC) meeting in late June, reflected their assessment that the pace of the economic recovery will pick up in coming quarters. Specifically, participants' projections for the increase in real GDP have a central tendency of 2.7 to 2.9 percent for 2011, inclusive of the weak first half, and 3.3 to 3.7 percent in 2012--projections that, if realized, would constitute a notably better performance than we have seen so far this year.1


So, "...2.7 to 2.9 percent inclusive of the weak first half...".  Q1 third estimate was, what 1.9%?  If Q2 comes in <2.0 as assumed and assume Q3 is no worse that 2.5% then Q4 will have to be the mutha of all Santa Claus quarters with help from the Easter Bunny, the Tooth Fairy, The Great Pumpkin - and maybe The Bernank with QE3 to make even 2.7%!  The math fails me - 4.5% maybe?

No freaking way 2011 is 2.7 to 2.9 at this juncture.



Thu, 07/14/2011 - 13:47 | 1456793 slewie the pi-rat
slewie the pi-rat's picture

even with a fiat diet and vitamin QE, turkeys don't fly too far, or too fast.  we still have an econom.  it just isn't growing much, maybe not at all, except for inflated FRNs for keeping score. 

i think we'll look back, someday, and see this as the period of irrational exuberance b/c the banksters and the pols hadn't completely finished us off, yet, and many of us were still believing and buying into their utter, unending, unopposed, unreal, uber-bullshit.   

Thu, 07/14/2011 - 14:09 | 1456884 Coast Watcher
Coast Watcher's picture

JPM might want to think about putting a minus sgn in front of that number if the latest IEA report has any validity.

"The IEA monthly report warned that unless OPEC increases production by at least 1.5 million barrels a day, world oil demand will surpass available supply during the second half of the year. The bottom line is that supply will fall short of the 89 million barrels of oil the global economy is expected to consume, which should push world oil prices higher – potentially substantially higher depending on global inventory levels."

Thu, 07/14/2011 - 14:30 | 1456969 foxmuldar
foxmuldar's picture

We still expect that Q3 growth will be better than Q2 growth -- which is currently tracking a little to the soft side of our 2.0% estimate -- as we still see the two positives for Q3 largely intact: a rebound in vehicle production and a decline in energy prices freeing up some consumer purchasing power. To be sure, both of these positives are looking a little less shiny than they did a few weeks ago. Revised Ward's vehicle production schedules are still boomy, but less so than the previous estimate.

This guy should be a candidate to replace Bernanke. Both say the same shit. Outlook is good but not as good as it looked last week but could be better if we don't look out too far. WTF? They must all come from the same planet but not one called earth.

Thu, 07/14/2011 - 14:33 | 1456999 foxmuldar
foxmuldar's picture

Oh great, gas price is down a few cents at the pump so I'll be sure to go out and buy a new truck. Well I might think about that but Im currently on a four day work week that could easily be turned into a three day week or god forbid I could be out of work if business doesn't pick up shortly. I think I'll hold off on that new truck. lol

Thu, 07/14/2011 - 14:44 | 1457069 LibertyIn2010
LibertyIn2010's picture

I'm confused...

Is Obama working to bring peace or "peas" to the Middle East???

Fri, 07/15/2011 - 00:30 | 1458451 zorba THE GREEK
zorba THE GREEK's picture

 Maybe he is going to pee on the Middle East.

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