Following a string of bad economic numbers, the final GDPNow Forecast for third-quarter GDP is 0.2%.
However a full two percentage points of that number is an inventory build. Since inventories net to zero over time, GDPNow’s true bottom line estimate is -1.8%.
In contrast, the Bloomberg Econoday consensus is a much higher 2.7% in a range of 1.6% to 4.8%. Econoday does not net out real final sales.
Someone is going to be hugely wrong, and possibly everyone if we see a number like 1.4%.
Goods Trade Deficit Expands a Shocking 9.2% as Exports Plunge
Earlier today I noted Goods Trade Deficit Expands a Shocking 9.2% as Exports Plunge
The GDPNow estimate makes more sense to me, and seemingly to the bond market as well as yields plunged across the board but especially on the long end.
I will cover bonds in a separate post, but the bond market reaction is as if the GDPNow estimate is correct. This is due to the fact that exports add to GDP while imports subtract.
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Inflation also subtracts from real GDP and inflation has been running hot.
Possible Errors
It’s possible the GDPNow model overstated the trade balance impact. A previous plunge in the model was also trade related.
If the GDPNow model has the trade impact correct, and I believe it does, then look for GDPNow to be much closer than the Econoday consensus.
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Source: https://mishtalk.com/economics/someone-will-be-hugely-wrong-on-tomorrows-gdp-number
