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Data from the BEA chart by Mish.

Chart Notes

• Gross Domestic Product (GDP) and Gross Domestic Income (GDI) are two measures of the same thing. Product produced should match sales and income. They do over time, but this is a large ongoing discrepancy (see next chart).
• Real Final Sales is the bottom line estimate of GDP. The difference between GDP and Real Final Sales is inventory adjustment which nets to zero over time.
• Real means Inflation adjusted using the GDP deflator as calculated by the BEA as the adjustment.

GDP rose 2.8 percent vs a rise of 2.0 percent for real final sales. The latter is the better number to watch because the difference is inventory adjustment that nets to zero over time.

Congrats once again to GDPNow for beating the consensus estimate. The final forecast for GDPNow, out yesterday, was 2.6 percent vs the Econoday consensus of 2.0 percent.

But GDI is missing in action, and that’s a much better number to watch, especially at economic turns.

Real GDP and GDI in Billions of Dollars 2024 Q2 Advance Estimate

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Advance GDP 2024 Q2

Real gross domestic product (GDP) increased at an annual rate of 2.8 percent in the first quarter of 2024, according to the “advance” estimate released by the Bureau of Economic Analysis.

• The increase in real GDP primarily reflected increases in consumer spending, private inventory investment, and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. [See note below, on this widely misunderstood idea.]
• The increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors were health care, housing and utilities, and recreation services.
• Within goods, the leading contributors were motor vehicles and parts, recreational goods and vehicles, furnishings and durable household equipment, and gasoline and other energy goods.
• The increase in private inventory investment primarily reflected increases in wholesale trade and retail trade industries that were partly offset by a decrease in mining, utilities, and construction industries. Within nonresidential fixed investment, increases in equipment and intellectual property products were partly offset by a decrease in structures. The increase in imports was led by capital goods, excluding automotive.

Understanding Imports

The BEA says “Imports, which are a subtraction in the calculation of GDP, increased.”

That statement is misleading if not inaccurate. Imports do not change GDP given the “D” stands for “Domestic” and imports are not domestic.

However, the BEA needs to subtract exports because procedures are such that imports are included in sales when they they shouldn’t be.

There is nothing devious about the procedure. It would be impossible calculate what percentage of every product is foreign.

The GDP-GDI Gap

The ongoing discrepancy between GDP and GDI is enormous.

The GDP-GDI gap is similar to the gap between the household survey and the establishment survey job reports.

Jobs Much Weaker than Expected, the Unemployment Rate Ticks Up

Counting negative revisions, there was unexpected weakness across the board in June, especially private and manufacturing payrolls.

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Data from the BLS, chart by Mish

For discussion, please see my July 5th report Jobs Much Weaker than Expected, the Unemployment Rate Ticks Up

Job Stats vs One Year Ago

• Nonfarm Payrolls (Blue): +2,611,000
• Employment (Red): +195,000
• Full Time Employment (Yellow): -1,551,000

So, is GDP or GDI more likely to be accurate?

Data is weakening nearly everywhere with generally negative revisions as well, especially in jobs.

Weak Data Says a Recession Has Already Started, Let’s Now Discuss When

On July 8, I commented Weak Data Says a Recession Has Already Started, Let’s Now Discuss When

Since then, economic reports have gotten weaker.

I discussed the weakening reports yesterday in Dudley Changes His Mind, Says “Fed Needs to Cut Rate Now” to Avoid Recession

Citing the McKelvey recession indicator, former NY Fed President Bill Dudley, wants the Fed to cut rates now. It’s too late Bill, recession has started.

Click on the above link for a series of charts, one shows delinquencies rising blamed on falling income.

As for GDP and jobs, expect negative revisions to both, perhaps a year from now. That’s how lagging the reports are.

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