September Rate Hike Back On Table: Q2 GDP Soars In Revision From 2.3% To 3.7% Driven By Record Inventory BuildSubmitted by Tyler Durden on 08/27/2015 08:43 -0400
Well, if the Fed is truly data-dependent, September is now squarely back on the table following the first revision of (double seasonally-adjusted) Q2 GDP data which soared from 2.3% to a whopping 3.7%, blowing out the Wall Street consensus estimate of 3.2%, and printing above the highest Wall Street forecast (the 3.6% from JPM). The reason for the surge was simple: from an inventory build of $124 in the first GDP estimate, the BEA now sees a total of $136.2 billion in inventory build in Q2. This is an all time record, and a number which suggests the upcoming inventory liquidation will be truly epic, not to mention recessionary.
The biggest surprise is today's new home sales data was not in the volumes of new homes sold, but the ongoing gaping divergence between volumes and prices. As we have shown previously, this record spread will have to close one way or another, and with the median new home sales price of $285,900 or virtually unchanged from a year ago, it would appear that new home buyers are finally starting to rebel against prices whose rise has far surpassed the increase in actual sales.
“Over the past five years, our businesses have created more than 11 million new jobs. Our economy is growing and creating jobs at the fastest pace since 1999.” - President Obama
Despite those feel-good headlines, the average American is far, far from solid financial footing.
What happens when we roll back into the next official recession, unemployment soars, and consumers really stop spending? What is revealed when you look under the hood of this economic recovery is that it is a complete and utter fraud. The recovery is nothing but smoke and mirrors, buoyed by subprime auto debt, really subprime student loan debt, corporate stock buybacks, and Fed financed bubbles in stocks, real estate, and bonds. The four retailers listed below are nothing but zombies, kept alive by the Fed’s ZIRP and QE, as they stumble towards their ultimate deaths. The coming recession will be the knife through their skulls, putting them out of their misery.
Just as we warned earlier - and Goldman subsequently confirmed - the Q2 "stack'em-high" surge in inventories (which has juiced hype hope that America is back, baby!) has consequences. The Atlanta Fed just released its latest forecast for Q3 GDP growth, lowering it to just 0.7%, citing an inventory drag of -2.2 percentage points. The Fed estimate is now 75% below the street's consensus!!
In historical context, this uninterrupted inventory accumulation is by any count extreme (the last time it was this high, scaled by real GDP, was just prior to the Asian flu in early 1998). This is a major problem for future growth, one that has been building for more than a year which is why the constant mainstream references to the great recovery are so very unhelpful. Anyone inclined to believe in the fantasy only makes this process more drawn out and, in the end, susceptible to that much greater of a downside to restore productive balance. In short, we already have the outlines of recession with the full weight of recession processes yet to be released.
"By stepping back and looking at the big picture, we can see that real estate should be correcting and trending down. The reasons why our grandparents bought their homes have changed. Government intervention cannot last forever. It will change from accommodation to devastation, when they finally run out of ideas. As for buying a house, I would consider it more of a luxury as opposed to an investment, and one has to be prepared for the possibility of it being a depreciating asset, especially if one decides to move."
What do El Paso, New York, and Chicago have in common? They are among the top 20 cities from which Americans are fleeing in droves...
Just when you think that the depravity of the United States cannot possibly get any worse, something else comes along to surprise us.
A conventional housing recovery in the US is now dead: the builders have spoken and what the next generation wants is to rent, not to buiy.
With Puerto Rico missing a payment on a bond overnight "due to non-appropriation of funds" but denying that this constitutes anything close to a default, the territory may be about to retake the limelight as Greece is now "fixed." As Peter Schiff explains, this is far from over... As in Greece, the Puerto Rican economy has been destroyed by its participation in an unrealistic monetary system that it does not control and the failure of domestic politicians to confront their own insolvency. But the damage done to the Puerto Rican economy by the United States has been far more debilitating than whatever damage the European Union has inflicted on Greece. In fact, the lessons we should be learning in Puerto Rico, most notably how socialistic labor and tax policies can devastate an economy, should serve as a wake up call to those advocating prescribing the same for the mainland.
"Racial and ethnic minorities now surpass non-Hispanic whites as the largest group of American children under 5 years old, the Census Bureau said Thursday. The demographic rise of minorities comes at a time when heightened racial tensions make headlines from St. Louis to Charleston, South Carolina, and as minorities lag in education, earnings and labor market outcomes."
One hoary old myth claims the interest rate you see isn't real. You see, it’s only nominal. To calculate the real rate, you're supposed to adjust the nominal rate by inflation.
The idea of an imminent US recession may seem moot as all the self-proclaimed experts and talking heads still acts as we are well into a recovery and patiently waiting for the forthcoming escape velocity which will take care of all ills plaguing today’s over-indebted society. Never do they stop to think about why things looks as dismal as they do. The sheer scale of the backwardness shown in such gross economic illiteracy suggest to us there is ulterior motives behind so-called Keynesian economic theories. Comparing GDP with cumulative goods sold and inventory accumulation since 2000 should tell you everything you need to know. The US economy is now on the verge of a new recession.