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Humiliated On Its Q1 GDP Prediction, Goldman Doubles Down, Boosts Q2 Forecast To 3.9%
Goldman, it would appear, are desperate to not be forced to admit they are wrong once again.
On the heels of their dramatic and humiliating swing from expectations of a +3.0% Q1 GDP growth rate at the start of the year to a current -0.6% expectation, the hockey-stick-believers are out with their latest piece of guesswork explaining how growth will explode to 3.9% in Q2 (a full percentage point higher than their previous estimate).The platform for this v-shaped recovery - "consumer spending will probably grow strongly, while the housing market should gradually improve." So 'probably' and 'should' it is then.
Via Goldman Sachs' Kris Dawsey,
- Economic activity retreated in Q1, as adverse weather, a large inventory correction, and a likely temporary drag from net exports pulled down growth. GDP growth in the quarter now looks to have been around -0.6%, even worse than the Commerce Department initially reported (+0.1%). However, we anticipate a solid bounce-back in activity in Q2. We are pushing our preliminary tracking estimate up to 3.9%.
- In today's Daily, we provide a detailed roadmap of our expectations for various economic indicators during the quarter. At a high level, consumer spending will probably grow strongly, while the housing market should gradually improve. Industrial activity and the labor market should continue to strengthen, with inflation remaining subdued.
- We continue to forecast 3.5% GDP growth in H2. Under our current forecasts, real GDP would increase 2.6% on a Q4/Q4 basis in 2014, below the 2.8 - 3.0% central tendency included in the Summary of Economic Projections from the March FOMC meeting.
Last week, Q1 GDP growth was reported at a disappointing +0.1%. Based on data arriving since the initial estimate—including March factory orders, construction spending, and the trade balance—we now estimate Q1 growth at -0.6%. The good news is that Q1 was distorted by a number of one-off factors, including the negative weather shock, a large drag from net exports, and a sizable inventory correction, which should not be repeated in Q2. As we noted in our recent US Views, data in hand for March and April are consistent with very positive momentum heading into Q2, and we anticipate a strong snap-back in growth.
Although subject to quite a bit of uncertainty given the lack of hard data in hand for the quarter, we are moving up our preliminary Q2 tracking estimate by nearly a full percentage point to 3.9%. Data subsequent to the Q1 GDP report have indicated a larger inventory drag in Q1 (and hence less correction needed in Q2) and a better trajectory of net exports into the current quarter than we had assumed (despite the larger drag in Q1). In addition, we moved up our assumption for real consumer spending growth.
Specifically, we envision the following landscape in Q2 (see table for details):
Consumer spending will probably grow strongly. Q1 consumer spending rose at a solid pace, but on fairly low quality composition. Higher utilities spending due to colder weather and Affordable Care Act-related healthcare spending accounted for the majority of growth. However, the trajectory of spending heading into Q2 was positive, as March core retail sales rose a strong 0.8% and we forecast a solid 0.5% gain in April based on data currently in hand. Similarly, April auto sales at 16.0mn units SAAR were above their Q1 average. While utilities spending will be a drag due to weather normalization, healthcare spending according to the Commerce Department's estimates should continue to outperform, owing to higher Affordable Care Act enrollments. More generally, we see a strong fundamental case for faster growth in consumer spending.
Housing market should gradually improve. Residential investment has been a drag on GDP growth for two consecutive quarters. Our baseline expectation remains for housing activity to emerge from its deep freeze in the coming months, as the weather drag abates and we pass the point of maximum impact from the jump in mortgage rates last year. We have already seen some signs of life in housing starts and pending home sales, although new and existing home sales continued to slide through March.
Industrial activity moving higher. The solid 54.9 print on the April ISM manufacturing index was a good start to the quarter, and we would not be surprised to see a modest continued increase from here. Various leading indicators of capital spending continue to point up, despite disappointing figures in Q1. As such, we anticipate solid growth in nondefense capital goods orders and shipments. Headline industrial production will probably grow more slowly than in Q1 due to weather normalization, as out-sized winter gains in utilities output reverse. (We are likely to see this effect in next week's April industrial production report.) However, the underlying trend on manufacturing industrial production should be better.
Labor market steadily strengthening. The April employment report was a very strong start to the quarter, showing a 288k gain in payroll jobs. Assuming trend-like gains of 200k in May and June would result in average job gains of about 230k/mo, well above the rate needed to bring down the unemployment rate at constant participation. The unemployment rate dropped sharply to 6.3% in April, which seems unlikely to be fully sustained for the rest of the quarter. Past sharp declines in the participation rate—such as that seen in April—have tended to at least partly reverse the next month. We expect initial and continuing jobless claims to continue to grind lower, reflecting a normalization of the layoff & discharge rate and the short-term unemployment rate. However, these indicators provide only a partial view on the degree of improvement in the labor market, as the hiring rate remains depressed and long-term unemployment is unusually elevated.
Inflation to remain subdued. Headline consumer prices will be met with several cross-currents in Q2. On the one hand, retail gasoline prices rose on a seasonally-adjusted basis in April and food prices likely continued to rise faster than the overall rate of inflation. On the other hand, prices for household utilities and heating fuels will probably reverse their large jump in Q1. Although headline CPI looks likely to rise 0.3% in April, we think that for the quarter as a whole headline prices may rise at a similar rate to core prices. We expect core CPI and the core PCE price index to continue to rise at an only-modest rate, in line with Q1 on a sequential basis. The core PCE price index will probably move up from its current year-on-year rate of about 1.2% to 1.3-1.4%, reflecting base effects from the sequester falling out of the calculation.
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Double secret probation bitchez. After looting the treasury, these fucks will loot their clients...
same as it ever was...
Ummmm.....did Obamacare get outlawed overnight?
Double secret probation indeed!
I'd like to know what they clowns are smoking!
It's like watching a Southerner trying to drive on ice....they're spinning the wheels...but they're not getting anywhere.
Don't underestimate the regression to the mean, it is a bi.ch
Funny how they can't get the forecast for GDP growth anywhere near correct, yet they NEVER have a losing day in the market.
"Economic activity retreated in Q1, as adverse weather"
I told ya here earlier they're gonna blame the negative Q1 GDP on weather and here's their "proof":
http://stevengoddard.wordpress.com/2014/05/08/coldest-year-on-record-so-...
Frankly, if you are still a client of Sacs o' Gold or Morgan "you'll never see $1300 gold again" Stanley, you deserve the butt-mugging.
+1 for butt mugging..
And I call bullshit. For Gold-mansacks to be humilated would require them to have some level of self respect. So, bullshit.
"consumer spending will probably grow strongly, while the housing market should gradually improve."
Consumer spending is going to grow strongly while wages are going nowhere?
Housing mkt is going to gradually improve while marriages and household formation in US are at all time lows? Perhaps the Asians are going to buy the houses?
It occurs to me that China has plenty of unoccupied homes already.
But the Chinese, like everyone else, love a bargain...
http://www.forbes.com/sites/gordonchang/2013/12/08/chinas-newest-city-we...
1.9% would have been a crazy estimate, 2.9% would have been a double-dog crazy estimate, but Goldman, ignoring all protocol jumped right to the triple-dog crazy estimate.
The muppets are all lined up. This is the part where they are being blindfolded. Next, they will be slaughtered after goldman sells them all they can buy.
Yes indeed. Let's see, how is the consumer doing these days...
http://research.stlouisfed.org/fred2/series/TOTALSL/
Oh fuck...
My favorite line: "Higher utilities spending due to colder weather and Affordable Care Act-related healthcare spending accounted for the majority of GROWTH".
So higher costs for consumers, means higher growth because this results in increased spending. I guess this means 3.9% "growth" is realistic when you factor in more consumer spending due to 20% higher grocery prices, $4.50/gallon gas, plus already higher utility and 0zer0care costs. Discretionary Retail is going to absolutely implode this year with all this "growth" in basic needs cost... food, energy, utilities, healthcare, housing, etc. BULLISH as in BS! I see lots of defaults on credit card debt this year.
PS. love "higher spending" due to Affordable Care Act... perfect example of oxymoron, or in this case 0bamaMoron.
Goldman's "predictions" reminds me of this.
http://www.youtube.com/watch?v=kRW7pITY5Cg
In global central bankstering T-ball, you get as many strikes as you need to finally get a hit, then you beat the umpire to death with your bat.
Blank the first quarter and you have to nail 4% growth rates the rest of the year to net 3% for the full year. Good luck with that.
Love the smell of Unicorns farting in the morning.
Or is it just plain BS ?
its raining where i am this morning. that should drag gdp down to 1.2%. afterall, who can expect/forecast rain in the spring???
Very cloudy with a slight mist here this morning. Had to turn the lights on to read this morning so in order to afford the extra electricity I will not be purchasing a 3rd refrigerator and a 5th 90 inch flat screen tv.
The forecast calls for weather. That's bad for the economy, right?
Same here, precipitation coming down sideways off the lake. Gonna be a showdown.
http://www.youtube.com/watch?v=0mmx68VmTEo
It seems they'e in need to close long positions...
We believe that consumers, bouyed by the fact that winter is over, will be enticed to spend their very last dime.
"I never make predictions, especially about the future." Yogi Berra
Good advice for GS, too.
BLah blAh blaH .... buy, buy, buy, bye-bye.......
There is life in the 'ol pump and dump yet.... just...... a..... few..... more......muppets.........
The prediction may be wrong, but the robots will move the markets 1% higher when they "read" it. Mission Accomplished.
The knees of this market are looking more wobbly every day now.
so spending will be down... and all the rest will pick up...
doesn't there need to be demand before you sell anything?
Yeah this one is going to happen. Only if they hedonically put their heads up their ass.
Economy is sputtering and not going anywhere.
pods
I believe the technical term is "rubberband snapback from polar vortex".
Bad news for Goldman....the first quarter's demand was not delayed , it was non existent.
So forecasting a release of that pent up demand in the second quarter is a major failing.
Lol....eventually they will get it right, once we hit zero. Until then look for 1.5% intangible growth.
Edit. I wish I had a silver eagle for every time I read "housing should start to improve" over the last five years. I am fairly certain my retirement would be secure by now if I had.... my retirement... kids college.... a couple moar ARs........
How long does it take for an empty house to completely compost? That's my housing metric.
No accountability. Leads to all the Lies, we now live with. I hate Liars.
And they hate you for hating them, now they feel they are even.
Forbes says Chinese are buying Detroit...
http://www.forbes.com/sites/gordonchang/2013/12/08/chinas-newest-city-we...
I wonder if the Chinese have checked out the taxes/retirement fund/bk situation in Detroit?
"Consumer spending will explode ..."
Am happy to say that outside of filling the gas tank (about $240 to $300/mo) and paying my electricity and internet (about $100/mo combined) the remainder of both my April and May consumer spending was cut even further, to about $70 per month. No shit. Being mostly self-sufficient and fucking over the crony-corporatist assholes is a good thing (I own my land and housing outright, and have no phone except my company cell).
I expect my consumer spending in June might explode from $70 to $75, however, as I need a minor supply, but I may find a way to offset the extra $5 elsewhere because I hate Uncle-fucking-Sam and his Goldman puppet-masters and the ponzi-economy that fucking much.
Sure, now you afford to go to Mc ee dees and get a couple burgers a month, or walk and get 5, gives you time to think of how tasty those will be and can keep the belly happy at the same time, two birds with one stone.
Wish I had your power provider. Fucking GA Power rapes me every month. Want to run your air conditioner between the hours of 9AM - 9PM? Well they will just double the rate per KwH during that window.
yes, two cars at 25mpg avg'd; easy to get to $500/month in gas. inelastic demand. america was built on $40bbl oil.....its been a real drag ever since then and only leveraged finacialization has masked it for shorter and shorter periods of time.
Sell side research is always such BS. I continually get a kick out of the language they use to fudge the issue, sit on the fence, be non committal, hedge their bets, not say anything at all really...
Just scanning down through this crap above, here are some examples:
will probably grow strongly
should dramatically improve
likely temporary drag
anticipate a bounce-back
should continue to outperform
we would not be surprised
will probably grow
should be better
have tended to
on the one hand
on the other hand
will probably move up
Phew! that was tiring...What bullshit
+1 for effort...
I especially like "anticipate a bounce-back"
I expect a bounce back of the Washington Senators baseball team... I've been waiting quite a while...
I like "we would not be surprised". I think I'll start using that one myself.
It conveys the air of detached wisdom like an old grandad sitting on the porch before young grandson Timmy falls off the tree swing, and the grandad thinks 'hmm, I saw that coming', but continues on reading his newspaper.
middle class SHRINKING.... someone tell goldman consumers are 70% of ussa economy.... no middle class....no economy and you dont have to be a fucking goldman deep state insider fed sucking ivy league old wealth grad to know it... bad weather 0 growth good weather 0 growth.... socialist for pres... zero growth.... WAIT UNTIL OBAMACARE REALLY KICKS IN THEN WE GET NEGATIVE GROWTH....
I'm sure we count all war realted expenses towards GDP, no? Maybe we do get "strong growth" next quarter...
Yeah, and flipping burgers is 'production'... as is sweeping a factory floor... if you can find a factory floor.
The sputtering recovery is all due to the ideaological right who refuses to allow a recovery to happen. \sarc
Obama spoke at a fundraiser for congressional Democrats in La Jolla, California yesterday:
These fools do realize the boomers are winding down their high spending lifestyles AND their children are in college debt/cannot find a job.
OR maybe not..........
no, they are not. a few are, only b/c they are already well out of line for spending down their savings. people will only change behavior when absolutely necessary, which is usually too late.
the boomers willspend all their money and then some trying to beat father time. the best business to start now is some kind of 'discount health care practice' staffed by a couple md's who do botox, skin peels, prescribe hgh, viagra, remove sunspots etc. cash only, outpatient, and give em a dose of mothers little helper and a stack of referral cards.
Consumer spending will explode because of inflation.
"Higher utilities spending due to colder weather and Affordable Care Act-related healthcare spending accounted for the majority of growth."
WTF? That's not growth.
right, its called inflation. but healthcare only counts towards about 7% of monthly household spending, so the money people spent on ACA, officially, didnt happen, except to increase growth, by spending money and not receiving any benefit or creating equity. understand?
Come July-August, maybe ZH will forget GS made this crazy guess.
But I think not ;-)
I bookmarked this article so I can plaster it in Blankturds inbox in September...
GS NWO in the making.
It's easy!
1) They short everything they can but keep predicting recovery (=mom and pop keep buying)
2) Simultaneously they have their buddies Janet accelerate tapering, Mario keep talking without acting and Christine roughen up world economies
3) Watch it all come crashing down (at a pre-agreed date of course, when all of a sudden the outlooks all change and something really "surprising" will happen)
4) Reap the profits
5) Make sure all outsider companies and banks don't get bailed out this time... (politicians and central banks worldwide "setting an example"!)
6) Pick up tons of companies and assets for 2-5 cents on the dollar