It was only two weeks ago when Goldman's Jan Hatzius, as we predicted he would, took a hammer to its GDP forecasts for Q1 GDP upon the shocking realization that Q4 "growth" was all inventory driven. This morning, the hammering resumes as Goldman, in the aftermath of today's disastrous retail sales, not only cut its Q4 2013 GDP forecast from 2.8% to 2.4% (vs the 3.2% initially reported), but slashed its current quarter estimate from 2.3% to 1.9%. As a reminder, this number was 3.0% three weeks ago. Once again, nothing beats an economist forecast to know what the future will not be.
From Jan Hatzius:
BOTTOM LINE: The January retail sales report was a significant disappointment, compounded by negative back revisions. Adverse weather was likely a substantial contributor to the weaker January figures. Separately, jobless claims were roughly in line with expectations. We reduced our Q1 GDP tracking estimate by four-tenths to 1.9%.
Headline retail sales unexpectedly declined 0.4% in January (vs. consensus Flat). Core sales?which the Commerce Department uses to estimate the personal consumption expenditures component of GDP?declined 0.3% (vs. consensus +0.2%). The composition of sales across categories was consistent with a negative weather impact, with weakness at department stores (-1.5%), sporting goods stores (-1.4%), and restaurants and bars (-0.6%). However, non-weather sensitive categories, such as non-store retailers?mainly online sales?also showed weakness, down 0.6% on the month. In addition to disappointing core sales growth in January, December growth was revised down four-tenths to 0.3%. Outside of core retail sales, auto sales fell 2.1%?consistent with disappointing unit auto sales reported by dealers?while building materials rose 1.4% and gasoline station sales increased 1.1%.
Initial claims for jobless benefits stood at 339k in the week ended February 8 (vs. consensus 330k), an increase from the prior week's 331k. Continuing claims fell slightly to 2,953k in the week ended February 1 (vs. consensus 2,964k), from an upwardly-revised 2,971k in the previous week. As we noted recently, we view the rise in continuing claims over the last month as mostly artificial.
We reduced our Q1 current-quarter GDP tracking estimate by four-tenths to 1.9%. We also reduced our Q4 past-quarter estimate by four-tenths to 2.4% (vs. 3.2% initially reported).