Real GDP, Real Final Sales, and Real GDI data from BEA, chart by Mish

Understanding GDP vs GDI

There are two measures of the economy Gross Domestic Product (GDP) and Gross Domestic Income (GDI). 

They measure the same thing but with time lags and discrepancies in between. GDI has been record percentages above GDP.

Many people had faith in GDI, or averages of the two. 

On an Income Basis the Economy is Humming, GDP says No, Which is Believable?

On September 6, I asked and answered the question On an Income Basis the Economy is Humming, GDP says No, Which is Believable?

Those who think we are not in recession place a lot of faith in GDI. But what is so believable about GDI?

The debate goes like this.

Recession Believers: Housing is crashing, real wages are declining, and real spending is at best stagnant. The yield curve is screaming recession. Target has warned three time, Walmart once, and the Fed is on a rate hike rampage.

Recession Disbelievers: Jobs are strong and so is GDI.

This one is not even close, but people will believe what they want. Jobs are a lagging indicator, and due to massive losses in the Covid recession, I fully expected a minimal rise in unemployment this recession. 

A likely explanation for the divergences is boomer retirements coupled with approximately 2 million people taking extra part time jobs to make ends meet due to high inflation.

But no matter what the explanation, all the pieces point to a GDI that's not happening. 

It's amazing that people think this economy is doing well when it's obvious that it isn't. 

Expect Big BEA Revisions

"I inquired and a BEA economist said (a) it’s probably mostly due to janky 2021/22 QCEW seas adj. caused by Covid weirdness; and (2) strongly hinted Sept will see big annual revision."

I posted this Tweet about a big annual GDI revision 

anyone noticed the unprecedented divergence between BLS agg payrolls and NIPA priv wages/salaries? i inquired and a BEA economist said (a) it’s prob mostly due to janky 2021/22 QCEW seas adj. caused by covid weirdness; and (2) strongly hinted Sept will see big ⬇️ annual revision pic.twitter.com/RC6LQyUV3N

— Seth Ackerman (@SethAckerman) August 24, 2022

Massive GDI Revisions 

Today the BEA released its "Final" for 2022 Q2 (to be revised later) estimate of GDP along with revisions to 2022 Q1.

GDP did not change but GDI did, in a major way.

And for Q2, GDI was unchanged. For those who believe in averages, the average of GDP and GDI for Q1 is also negative.

GDP and GDI Before Revisions 

GDP and GDI After Revisions 

Recession Underway 

Guess what econ fans. A recession has started. If there are more revisions they are likely to be negative as well.

I still expect a third quarter of negative GDP. But really, who cares?

As commented on August 19, Expect a Long Period of Weak Growth, Whether or Not It's Labeled Recession

GDPNow Forecast for 2022 Q3 Barely Positive Despite New Home Sales Surprise

Meanwhile please note GDPNow Forecast for 2022 Q3 Barely Positive Despite New Home Sales Surprise

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