About That US Economic Rebound...

Following the steep drop in first quarter GDP which printed at 0.7% in the first revision, economists, strategists and pundits have once again put their collective hopes on another second-half rebound, with expectations for a Q2 rebound running high - the Atlanta Fed's latest GDP nowcast stands at 2.5%.  Unfortunately, this may once again be unwarranted. The reason: the collapse in retail spending which many had expected would be transitory and which has pressured discretionary consumer stocks in recent weeks, just refuses to go away. As we showed on Friday, both critical categories of retail sales (based on BofA credit and debit card spending data), there has been a dramatic collapse in both luxury ...

... and home improvement related spending.

The math here is simple: without a strong rebound in spending, there simply can not be a strong rebound in GDP, period.

Which, incidentally, is precisely what Goldman's latest Current Activity Indicator - a real-time proxy for GDP - has found. Here is David Kostin in his latest US Weekly Kickstart:

The Goldman Sachs Economics US Current Activity Indicator (CAI) is a proxy for real-time GDP growth and the metric has slowed to 1.3%. Our economics colleagues expect GDP growth will accelerate to a 3.2% pace in 2Q and average 2.3% during 2H 2016.

This was the lowest print in over five years.

And here is why the Fed will not only not be hiking in June or July, or frankly any time soon. In fact, judging by this chart - and based on the recent collapse in global bond yields - the Fed's next move will be to cur rates.