Atlanta Fed GDPNow data, chart by Mish
The GDPNow forecast was 2.5% in the May 17 retail sales report. It is now 1.3% and falling rapidly.
This photo is from June 1.
The GDPNow model’s estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is 1.3% on June 1, down from 1.9% on May 27. and this morning’s construction spending report from the US Census Bureau, nowcasts for second-quarter real personal consumption expenditure growth and real gross private domestic investment growth fell 4.7% and -6.4%, respectively, to 4.4% and -8.2%, respectively.
1.3% is below the dropout rate. However, actual final sales are the number to watch.
This is the true turnover of the economy. The remainder is an inventory adjustment that returns to zero over time.
GDPNow’s estimate for actual final sales is a very respectable 2.9%.
Why the call for recession?
On April 28, I reported a 1.4% decline in GDP in the first quarter of 2022, ringing the recession bell
Economists missed the mark as GDP fell along with actual final sales.
Actual end sales were negative in Q1 and I expect a repeat in Q2 as I don’t think retail sales will hold.
On May 17, I noted that retail sales were easily beating expectations, US Treasury yields were jumping in response
However, the next day I noticed that Target is plunging 25%, what about the big retail boom yesterday?
Advance retail sales reports from the Commerce Department were mind-boggling. Reports from Target and Walmart strongly suggest otherwise.
Car sales in April were also a disaster.
Automotive News reports that the market is losing steam further; SARAR falls to 2022 low
May U.S. auto sales: Ford, Toyota, Honda, Hyundai, Kia and Subaru after declines behind strangled supply chains, tough comparison to strong May 2021
Add it all up and retail sales plummet. A recession is now on the near horizon.