GDPNow data from the Atlanta Fed, chart by Mish

Please consider the GDPNow Forecast for 2023 Q1 as of April 3, 2023.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2023 is 1.7 percent on April 3, down from 2.5 percent on March 31. After this morning’s construction spending release from the US Census Bureau and the Manufacturing ISM Report On Business from the Institute for Supply Management, decreases in the nowcasts of first-quarter real personal consumption expenditures growth and first-quarter real gross private domestic investment growth from 4.6 percent and -7.3 percent, respectively, to 3.7 percent and -8.5 percent were slightly offset by an increase in the nowcast of first-quarter real government spending growth from 1.7 percent to 2.1 percent.

Synopsis 

Since March 23, the baseline GDPNow forecast has fallen over 50 percent from 3.5 percent to 1.7 percent.

However, the number to watch is Real Final Sales (RFS). The difference between RFS and the baseline forecast is Change in Private Inventories (CIPI) that nets to zero over time.

Miserable ISM Numbers

Chart and excerpts below by permission from the Institute for Supply Management ® ISM® 

For discussion of the numbers that sent GDPNow reeling, please see Manufacturing ISM Contracts for the 5th Month, With New Orders Falling Rapidly

Revisions

If RFS remains strong and is not later revised lower, the NBER is unlikely to declare a recession.

But revisions have been hugely negative. 

Real Income Was Negative in 2022 Q4, Big Negative Revisions to GDP

(Click on image to enlarge)

Real Gross Domestic Product (GDP) and Real Gross Domestic Income (GDI) 2022 Q4

Significant Negative GDP Revisions Are Consistent With Recession

On March 31, I noted Real Income Was Negative in 2022 Q4, Big Negative Revisions to GDP

Real Gross Domestic Income was -1.1 percent in 2022 Q4 with RFS +1.1 percent. GDP and GDI are two measures of the same thing. Which do you believe?

Even if you believe RFS, please note that RFS private domestic was 0.0 percent. The rest was government spending and exports aided by the war in Ukraine. 

As I have commented many times, heading into recessions the revisions will tend to be heavily negative. Coming out of recessions, revisions tend to be positive.

Money Supply Is Headed for 6th Month of Contraction

(Click on image to enlarge)

Money supply is also consistent with recession. As noted on March 29, Money Supply Is Headed for 6th Month of Contraction

We have not seen declines like this since the Great Depression.

The contrarian position isn't that a recession will come later, but rather that it's already started.

More By This Author: