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September Rate Hike Back On Table: Q2 GDP Soars In Revision From 2.3% To 3.7% Driven By Record Inventory Build
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).
This is what the BEA said about the source of the upside:
The increase in real GDP in the second quarter reflected positive contributions from personal consumption expenditures (PCE), exports, state and local government spending, nonresidential fixed investment, residential fixed investment, and private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.
The acceleration in real GDP in the second quarter reflected an upturn in exports, an acceleration in PCE, a deceleration in imports, an upturn in state and local government spending, and an acceleration in nonresidential fixed investment that were partly offset by decelerations in private inventory investment, in federal government spending, and in residential fixed investment.
Here is the breakdown:
But the real reason for the surge is shown in the chart below: 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.
So, paradoxically, as the market bulls scramble to find some bad news in this report which in isolation puts a September rate hike back on the table, the reality is that the inventory liquidation is result in a tumble in Q3 GDP (or Q4, or Q1 2016 - whenever it does take place). As such, the market bulls can point to the latest Atlanta Fed "nowcast", which after yesterday's "strong" durable goods number was revised from 1.3% to just 1.4%.
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 was 1.4 percent on August 26, up from 1.3 percent on August 18. The forecast for real GDP growth increased 0.1 percentage point to 1.4 percent after this morning's advance report on durable goods from the Census Bureau. The report boosted the model's forecast for equipment spending in the third quarter from 7.7 percent to 8.9 percent, and led to a slight improvement in the contribution of real inventory investment to third-quarter GDP growth.
As a result of the record increase in inventories, expect the Atlanta Fed to promptly cut its already painfully low Q3 GDP estimate, which may just be the hook the Fed will use to avoid hiking rates in three weeks time.
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Oh this will be fun to watch.
No need for rate hike, China and EM will do it for Mr. Yellen. He will soak up the USTs as needed to keep a cap on the rates, a stealth QE. Which will lead to a "quality" collateral shortage and the shit show will continue a bit longer. Question: what happens when Darth Helmet owns all the USTs?
Unless something spectacular happens the S&P death crosses on Friday. That's what happens.
This is BS. FED desperate to keep the kabuki alive. The illusion of FED control.
China is going to keep on doing what they're doing, setting the pace and swamping any FED action.
WHAT I SAY!?
THE FERAL RESERVE WILL RAISE RATES NO MATTER WHAT!
YOU MOOKS!
Listen -- I really enjoy your comments. Better yet, I really like the word, "mooks"... rolls off the tongue well. I've even started calling people around the office, "mooks".
I may just name my first born, "Mooky"... or, even better, "Mookie" with the 'ie'... yeah, "Mookie"... that kid is gonna be great!
I'm blushing..
Mook is a great old word an old boss scolded us young nit wits with some 40 years ago and it stuck with me ever since.
When he got really mad, he threatened to have us "excoriated by a basilisk"
Have fun with that one..
Have fun watching the FED. They are irrelevant.
"Question: what happens when Darth Helmet owns all the USTs?"
Depends who you ask. The Fed would say it's time to hang out the "mission accomplished" banner.
Darth Helmet doesn't need to own all UST's, just 51%. Which it probably is very close to controlling right now through itself and proxies (ie. Belgium). When the Fed controlls the majority of UST, it's game over because the bond vigilantes are neurtralized. The Fed learned from the EU clusterfuck, and has been implimenting this control since 2009. When they reach majority status, the Ponzi is perpetual because they also have the printing press. Bottom line, total defacto control of the bond market controls the Fed Govt, and hence the security state. Welcome to the New Feudal World Order where banks manipulate the world to redistribute all assets that remain with the middle class to the new Feudal Lords, making Serfs of the masses.
Numbers UP, market UP, dollar UP, interest rates next...STFR
All is well.
Nothing to see here.
Move along.
Oh look! A unicorn vomiting rainbow!
And girls fart smell like flowers.
Ooops....time to raise rates now, not September.
Why does anybody refer to graphs charts and predictions and cycles, they are all meaningless. These low life scum are going to continue to manipulate everything until the whole system comes crashing down. In the meantime spare us this useless data
Markets top on good news - so let the FED apologists get all excited and make the case to hike - great opportunity to sell
soon enough, they'll raise themselves
"The reason for the surge was simple:" We need to fix the "facts" to fit the narrative/policy.
BINGO!
.
RAISE RATES YOU FUCKING CUNT YELLEN, I FUCKING DARE YOU.
WHATS THE REASON NOT TO, EVERYTHING IS AWESOME AGAIN APPARENTLY.
Things are great man ... they just keep getting better.
https://www.youtube.com/watch?v=VlVmdGiAH2A
"my future's so bright, I gotta wear ... shades"...
Bullshit!
US inflation was understated by 8.9% in 2014 per the Chapwood Index. Official inflation was 0.8% versus the Chapwood inflation of 9.7%. Conjuring up GDP growth with fake, lower inflation number has been a very old trick in the land of the free.
No question about it and just a reminder they now count plenty of new bs that never used to be counted in order to goal seek their gdp number. Do you you ever wonder why they don't adjust the historical gdp numbers when they make these gdp calculation adjustments? We all know why.
This Christmas will be awesome. 9 big screens for my bedroom!
I wonder what it takes to get the exact number they want - who makes that one call to the BEA and all other institutions who seem to publish exactly perfect numbers for the powers that be whenever they are needed. for Umich Consumer confidence its easy to guess, it is after all Reuters owned.
No wonder Goldman wants to start their own financial media outlet - everyone in the circle would be ex-goldmanites.
Hey why don't you raise rates while the rates are rising? Yep, powerless oh so powerless fed. Me so sorry.
"U.S. GDP grew 3.7% in second quarter, not 2.3%" According to MW.
All ZH'rs know this is IMPOSSIBLE. All technical indicators point the other way. CAT sales down what, 28 or more months in a row? Just one indication (yes i know that is global sales). But please explain (anyone) how GDP goes up when oil sold, a MAJOR part of the economy has gone from over $100/BBL to $40/BBL? This is absolute fucking horseshit. Penning a false narrative that will be part of recorded history so it can be argued (for example) that Obama is the greatest president ever, or that the Fed did XYZ and it was the right thing to do because the economy was "clearly in recovery mode". Horseshit is what this is...
Warehouses full of TP and potato chips.
You're using a single company, CAT, as a major indicator? Good luck with your investing and trading.
I guess you missed this...
"Just one indication (yes i know that is global sales)."
And this...
"But please explain (anyone) how GDP goes up when oil sold, a MAJOR part of the economy has gone from over $100/BBL to $40/BBL? "
Which would include dozens of companies like oh say Exxon, Haliburton, BP, Shell, and any other oil related company you can think of.
That's the triple cyclical oil seasonal adjustment factor.
Divide the price of oil today to the price of oil one year ago. Then divide that number into the price of oil today three times. Add Pi for a safety factor, and there you have it. Use this new numberas your seasonal adjustment factor for the oil sector.
For example:
$41/90 equals .45
41/.45/.45/.45+3.14 =453.0714128
Much better!
I use 1642 stocks as an indicator. You should see my spreadsheet. Guess what it shows...
Profits per share up 0.5% for the last quarter year over year.
THe same group that brought you that stellar GDP number also shared that Business profits after taxes are down 2.69% for the last four quarters.
That would be below the 3, 5, and 10 year average growth rates...
But who cares? As long as the warehouses have room to store all this production that no one wants, the GDP can soar and the markets can rejoice.
Boom!
Bullshit narrative - and the American sheeple buy it (because they are morons) ...
https://www.youtube.com/watch?v=VlVmdGiAH2A
Dear FED:
Liar liar,
pants on fire.
Yours Truly,
The broken clock.
LOL getting more that my usual dose of depression here on Zerohedge.
LOL getting more that my usual dose of depression here on Zerohedge.
So I stumbled upon this last night - Fed experimenting with Reverse Repo's using soma account holdings. Almost sounds like a micro adjustment to the Fed Funds rate and a way to provide additional backstopping to PD's - http://www.newyorkfed.org/markets/rrp_faq.html.
Why is the Fed testing ON RRPs?
The Desk has been testing ON RRPs since September 2013, and the Committee has indicated in the normalization principles released in September 2014 that it intends to use an ON RRP facility as a tool in the normalization of policy as needed. In that regard, it has directed the Desk to continue testing to further examine how the ON RRP facility might be best structured to help control the federal funds rate while also limiting the potential for unintended effects in financial markets.
Which is exactly what China is doing to inject capital into their PD network, and thus absorb selling pressure.
Seems that this is almost production ready after testing yesterday - https://apps.newyorkfed.org/markets/autorates/tomo-results-display?SHOWM...
Anyone else notice that the graph doesnt support the story? Giverment spending and fixed investment were the resasons for the boom. inventories were up but its minor in comparison to the other two.
Not this thread again.
Everything is wonderful
It will not be cold this winter
Everyone get a raise in pay
Only if bullshit was gold
More lies! Buy stocks suckers!
So the lying shitbags over @ the Fed will use the inventory-built GDP print to justify the rate increase, while afterwards, explaining the Depression as a result not of already-downtrending consumer demand, but a "normal response to the rate increase". Got it.
Hang on till years end and buy all the "consumer goods" you want at next to nothing prices.
I'm getting a tv with a microwave and a smartwatch bolted to it. Just because.
Regarding the inventory build, I can tell you for certain that it's continuing in my basement as I await the collapse of this joke on humanity.
Government statistic eh?
First the phoney reporter shooting, now this? Ha Fucking Ha.
Not saying that inventory buildup isn't a problem, because it is. They're bloated and indeed at record levels, and they're going to subtract from GDP when (if?) they get taken down to more reasonable levels. They'll plunge further if the Fed increases holding costs by raising rates.
But the poster needs to remember that GDP is ANNUALIZED, meaning that everything that happened during a quarter is converted to an annual amount.
That includes inventory change. So the $124 billion and $136 billion figures presented REALLY represented ACTUAL increases of about $31 billion and $34 billion during the past two quarters. These are not small increases, and they are troubling, but readers are going to come away from this post thinking that inventories have gone up by about $260 billion during the past two quarters, and that just isn't so.
So in PCE....housing was revised to negative from being the largest item, yet housing has the hottest inflation? Someone help me out with this....
No one is buying s***. Manufacturers are building inventories and hoping that soon something is going to change. Within the next couple of months if demand doesn't exceed production, recession is coming!
Like Coyote running on thin air, its pointless but what else is he gonna do on the way down.
Record inventory build of BS
With today's data, corporate business profits after taxes rose 1.05% for the quarter (YOY)
The last four quarters of corporate business profit are down (as in negative) 2.69%.
Business profits before taxes were negative 2.19% for the second quarter, and are up 0.64% for the last twelve months. (if business taxes before taxes are negative and after taxes are higher, someone's finding some write offs somewhere...)
How long will the markets continue to ignore something so crucial to business growth? Actually making money.
Is this not like the porn websites that say they have a pill that will make your dick bigger by four inches but its only true because you were flacid until you got an erection?
An erection that might last four hours until the effects wear off!!
You really just cant make this shit up. Fuckinh hillariously pathetic!
I'll bet my shorts this rate hike ain't happening.
You don't want to be tarred with the label 'MOOK' now do you...?
If it was a record increase why is the green on the colored GDP Breakdown chart which is 'change in private inventories' so tiny???
The dirivative charts only show half the story.. they have to be paired with actual volume. It may look like things are getting better, but if imprts are double exports the debt load still can be a future disaster.
Long Newport News carrier assembly yards, Langley, 'non-lethal-armed' drones, Lockheed, Raytheon, BAE, Honeywell, and the 'MIC' in general. Those are the 'inventory builds' one needs to keep an $eye on.
GDP is already one of the most useless economic statistics ever invented, but the credibility of this revision is clearly a lot lower than the revision itself.
Um, the GDP revision up 1.4% was due to a $12 billion inventory jump? 1.4% is over $200 billion!
So let's hike rates bitchez!