We are right back to the initial forecast in August.
What Happened?
- On September 28 following the Personal Income and Outlays Report, the forecast rose 0.4 percentage points to 1.8%.
- On September 29, following the Census Bureau Advance Trade Report the forecast fell 0.7 percentage points to 1.1%.
- On October 1, following the Manufacturing ISM report, the forecast fell another 0.2 percentage points to 0.9%.
ISM Discussion
See my discussion ISM Flirts with Contraction, Export Orders and Backlogs Contract for 4th Month.
Advance Trade Numbers
Let's investigate the Census Report Numbers to see what's behind the 0.7 percentage point plunge on September 29.
The following table I put together will help visualize what happened. Numbers are in millions of dollars. Pay attention to the seasonally adjusted numbers.
| Month | Seasonally Adjusted Balance of Goods | Unadjusted Balance of Goods |
|---|---|---|
| January | -59,815 | -57,405 |
| February | -55,218 | -43,328 |
| March | -70,527 | -64,390 |
| April | -60,422 | -61,423 |
| May | -59,747 | -57,046 |
| June | -62,256 | -64,838 |
| July | -59,123 | -68,360 |
| August | -67,187 | -68,025 |
Notes:
- The numbers represent the balance of goods, not balance of trade (goods plus services). The full report will be available on October 6.
- The seasonally-adjusted balance of goods deficit unexpectedly widened from $59.123 billion to $67.187 billion.
For the deficit to widen, exports fell, imports rose, or both. Certainly manufacturing exports fell for the 4th consecutive month as noted by the ISM report.
Recall that imports subtract from GDP and exports add to GDP.
GDP Revisions
On September 25, the BEA upped the Second Quarter GDP estimate from 3.6% to 3.9% based on "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 and in federal government spending."
Evolution of First Quarter 2015 GDP
- +0.2% Initial
- -0.7% Revised
- -0.2% Revised
- +0.6% Revised
GDP Quarter by Quarter
- 1st Quarter: 0.6%
- 2nd Quarter: 3.9%
- 3rd Quarter: 0.9% GDPNow Model
If those numbers hold, the average is about 1.8% annualized. Anyone think downward revisions coming?
Question number two: Anyone think the Fed will hike if 3rd quarter GDP is close to or below 1%?
Mike "Mish" Shedlock
