Last Thursday, following the second in one day GDP forecast tweak lower by Goldman on disappointing Consumer and ISM data, we said [4]"And this, ladies and gents, is ultra high frequency economics, where HFT machines push the market up and down without reason, and where this has an immediate impact on economic indicators, all changed around in real time." Sure enough, today, following the better than expected Services ISM print, Goldman has now revised its GDP tracking number, this time higher, from 1.9% to 2.0%! At this rate GDP will soon become a coincident indicator of nothing more than consumer confidence that record high gas prices are a bullish indicator for consumption. That it is already a coincident indicator to real-time economic data, and merely shows the prevalent confusion within the strategist community, is a given.
From Goldman:
Firm Growth in Services; Revised Q1 GDP Tracking Estimate to 2.0%
Factory orders -1.0% (mom) for January vs GS -2.1%, median forecast -1.5%.
MAIN POINTS:
1. The ISM non-manufacturing index unexpectedly increased in February from 56.8 to 57.3. Consensus forecasts had expected a modest decline in the index. The composition of the report was mostly favorable. The new orders index rose from 59.4 to 61.2, and the index for general business activity rose from 59.5 to 62.6—the highest since February of last year. The employment component declined slightly, but this followed a sharp increase in January, and the level of the index remains high. Overall the report suggests firm growth in US service sector activity.
2. Factory orders declined by 1.0% (month-over-month), a slightly smaller drop than expected. The key components of the report were positive for the near-term outlook. In particular, growth in core durable goods orders (orders for non-defense capital goods ex-aircraft) was revised up to -3.9% from -4.5% in the preliminary release. Growth in core shipments was also revised up by a small amount. Finally, nondurable goods inventories grew more than we had expected during the month.
3. Details of the factory orders report were slightly positive for Q1 GDP. We revised up our tracking estimate by one tenth to 2.0% (annualized).