Goldilocks Q2 GDP Revision Leaves Algos Confused

Tyler Durden's picture

After sliding from a stall speed-esque 2% in Q1 to sub stall speed 1.5% in the Q1 preliminary print, today's first revision was expected to be a solid bounce to the horrible preliminary economic data, with whisper numbers heard as high as 2.0% on the back of the recent plunge in the deficit (driven purely by a collapse in Chinese exports and a brief drop in crude prices in June, long since retraced). Instead the number came precisely in line with the consensus estimate of a 1.7% annualized growth, with the all important Personal Consumption Expenditures adding a modestly higher 1.20% (was 1.05% last). As expected, net exports shifted from a decline of -0.3% to an increase of 0.3%, which meant that the fudge factor was inventories, which also flip flopped, declining from the previously positive 0.32% to a negative -0.23%.

In summary, the GDP number was the worst possible for a market in which good news, relative to an expectations benchmark, is good news, and bad news is great news. The only thing the algos don't know what to do is when numbers come "just right" - which is what just happened. And now- back to Congress doing nothing to resolve the Fiscal Cliff which would detract up to 4% from GDP in 2013 if nothing is done, which is assured as long as the S&P continues trading near 2012 highs.

Source: BEA

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Jason T's picture

lets not forget net gov't savings is bad for corp profits is positive, good if negative.  bringing down the deficit is bad for corporate profits.  so fiscal cliff should be bearish for equities.

buzzsaw99's picture

algos are confused whether to btfd or btfr

when doubt itches buy aapl bitchez [/sarc]

Jlmadyson's picture

S&P been way too quiet lately. They have to be looking at the debt ceiling and fiscal cliff stuff and saying WTF.

Cannot downgrade the system once on one of the issues and have a double whammy a year later and stick your nose up in the air and simply walk away.

And it isn't like political environment is any better than this time last year.

Much the opposite.

What say you S&P?

101 years and counting's picture

annualized gdp growth of ~2% = 300B in growth.  annualized debt added, 1.5 trillion.  nice return. 

Doubleguns's picture

Fiscal clift would detract 4% from GDP.  4% X 1.7 = .068 reduction in GDP resulting in a 1.7 - .068 = 1.632 GDP.


Am I missing something here. I fail to see how anyone could call that a clift. Anyone?

adr's picture

A real working person making $50k would see about $400 a month drop out of his take home pay. Coupled with the massive inflation coming next year, a 4% drop is optomistic. For the middle class hanging by the thinest of threads, the fiscal cliff is tying two tons of weight to thier feet.

Doubleguns's picture

Now THAT clift I can see. Take home pay dropping!!!   The 4% drop in GDP declared as a clift was eluding me.

mammoth mo's picture

Here's the beauty of the number.

It spells catastrophe but is being spun as success.

They know in 3 minutes it will all be forgotten in a mish mash of economic data tied to the number of skips a 5 year old takes on the way to school.


Interesting enough Marketwatch is posting their will be no QE on Friday and of course the market is rising.


Must have been a really good skipping day.

Mugatu's picture

TPTB keep dangling the QE like a carrot on a stick.  Every week we hear it is coming soon, but it is always out of reach.  Even stupid comic characters eventually realize that they will never reach "the carrot" at the end of the stick - when will this market realize it?

Talk about clueless!

GeezerGeek's picture

Wiley Coyote never stops trying to catch the Road Runner. Democrats never stop trying to tax the rich. Republicans never stop trying to kill all the old folks. Voters never stop believing the politicians.

Talk about beyond clueless!


LooseLee's picture

Your assumption that bulltard equity retards can have an insight into what is really going on is amusing. The past 3 years should confirm that, for the most part, those positive on equities have been right in price and trend, and wrong in knowing it is time to exit. Pigs (most of those in the culture of equity) get slaughtered....

Meesohaawnee's picture

algos wont be confused. Being that the market is now just a price propaganda machine Ben has his orders from on high to ramp it up after the convention to make things look all cute and pretty. Party on sheeple. !

adr's picture

So inventory that was counted is no longer there, exports that were negative somehow became positive, and people actually spent more than the government thought?

I am supposed to believe this number?

GDP is a bottomless pit of complete bullshit. If you think the US economy actually grew this year, I've got some nice land on Mars to sell that should be ready for developing in five years. Lennar is going to need some market expansion to justify their stock advance.

GeezerGeek's picture

Being from Florida, I only believe in buying swamp land. If someone offered swamp land on Mars I'd hop right in.

Meesohaawnee's picture

oh .and now the reason to ramp crude to 100.. Yippeee party on .. fuck the middle class more. .yippee.. more QE for everyone!!

LoneStarHog's picture

Why don't they scrap this "annualized" crap?  Oh, wait, that would expose the true economic conditions.  Silly me!

adr's picture

Last year you had $5, and this year you have $10. The government says, that is fantastic because you doubled your net worth. 100% growth!!!!

You say, yeah but I had $100 two years ago so I'm still down 90% assholes.

Tippoo Sultan's picture

"I drink your milkshake. I drink it ALL up."

Jlmadyson's picture

Yea that inventory stuff is total BS fudge in effort to fudge the rest of the year.

tuttisaluti's picture

so, what do we expect now from the jackson ass meeting?

orangegeek's picture

Algos are confused all right.  SP500 in a 25 point band since the first week of August.


Could be a consolidation before another move up.  Another move up in this slop economy - sounds about right.

Winston of Oceania's picture

The bidding goes the way the rigged game masters want, that's all this is any longer. Mr. Market is crouched in the trees waitng to pounce...

Snakeeyes's picture

Obama did say that energy costs would necessarily skyrocket! And business cut equipment investment. Nice revision!

madcows's picture

Well, I for one don't trust any of their numbers: GDP, UE, CPI, SSI, Housing Starts.  Hell, if I asked the government what time it was I wouldn't believe them.  I've been lied to too much.