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Expect A Deep Recession To Start This Quarter Or Early Third Quarter

Tyler Durden's Photo
by Tyler Durden
Saturday, Jun 04, 2022 - 07:30 PM

Authored by Mike Shedlock via MishTalk.com,

GDP estimates are plunging but are still too high. A recession is on the near horizon.

GDPNow Data from the Atlanta Fed, Chart by Mish

The GDPNow Forecast was at 2.5 percent on the May 17 retail sales report. It's now 1.3 percent and falling fast. 

This snip is from June 1. 

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is 1.3 percent on June 1, down from 1.9 percent on May 27. After this morning's Manufacturing ISM Report On Business from the Institute for Supply Management, and this morning’s construction spending report from the US Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and real gross private domestic investment growth declined from 4.7 percent and -6.4 percent, respectively, to 4.4 percent and -8.2 percent, respectively.

Stall Rate

1.3 percent is below the stall rate. However, Real Final Sales is the number to watch. 

That's the true bottom line number for the economy. The rest is inventory adjustment which nets to zero over time.

The GDPNow estimate for Real Final Sales is a very respectable 2.9 percent.

Why the Recession Call?

On April 28, I reported GDP Declines 1.4% in First Quarter of 2022 Sounding Recession Bells

Economists missed the mark badly as GDP shrunk along with real final sales.

Real final sales was negative in the first quarter and I expect a repeat in the second quarter because I do not believe retail sales will hold up.

On May 17, I noted Retail Sales Easily Beat Expectations, US Treasury Yields Jump in Response

However, the next day I noted Target Plunges 25%, What About Yesterday's Big Retail Sales Blowout?

The advance retail sales reports by the commerce department were stunning. Reports by Target and Walmart strongly suggest something else.

Car sales in April were also a disaster.

Automotive News reports Market loses more steam; SAAR tumbles to 2022 low

May U.S. auto sales: Ford, Toyota, Honda, Hyundai, Kia, Subaru post declines behind choked supply chains, tough comparison to robust May 2021

Add it all up and retail sales are crashing. A recession is now on the near horizon.

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