GDPNow data from the Atlanta Fed, chart by Mish

Please note another GDPNow Model plunge following a miserable ISM number. 

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is -2.1 percent on July 1, down from -1.0 percent on June 30. After this morning's Manufacturing ISM Report On Business from the Institute for Supply Management and the construction report from the US Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and real gross private domestic investment growth decreased from 1.7 percent and -13.2 percent, respectively, to 0.8 percent and -15.2 percent, respectively.

Once again, the number to watch is not the headline -2.1 percent forecast. Rather, it's Real Final Sales (RFS).

RFS plunged a whopping 1.2 percentage points today to a barely positive 0.3 percent.

The Odds of Recession Starting in the "First" Quarter of 2022 Just Leaped

On June 29, I commented The Odds of Recession Starting in the "First" Quarter of 2022 Just Leaped

I made that call following a BEA revision on Wednesday to first-quarter GDP.

The BEA's final forecast for the quarter went to -1.6 percent from an initial -1.4%. 

That's not the basis of my claim. Rather it was the huge revision from -0.6 percent to -1.2% in RFS. 

Whoa! Massive Inventory Overhang

We have never seen a massive inventory overhang like this.

It's the result of fiscal and monetary stimulus on steroids. Merchants ordered far more goods than they could possibly sell. 

It's that chart that explains the plunge in the baseline GDPNow forecast from +0.7 percent to -2.1 percent. 

A strong April retail sales report kept RFS in positive territory.

Looking Ahead

We have already seen revisions to retail sales, personal incomes and outlays, and Q1 GDP.

This is what happens in recessions. Data revisions beget data revisions.

Yesterday I commented 

Looking ahead, I expect more weak numbers and more negative revisions. The second quarter ended today, But the data lags. We have a key ISM number next week, another retail sales report, more housing reports, and another personal income and outlays report. 

Look at the trend folks. Where is it headed? And there is still a month's worth of data coming in. 

The ISM report was not next week, it was today. 

Where's the data headed? You saw today. 

To repeat: The quarter is over but the data lags. We still have more housing reports, another retail sales report, and another personal income and outlays report, and another ISM report.

I ask the same question today. Look at the trend folks. Where is it headed?

Originally published Friday, July 1.