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GDPNow data from the Atlanta Fed, chart by Mish.

The July 7 update to the Atlanta Fed GDPNow Forecast bounce slightly higher to -1.9 percent. 

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is -1.9 percent on July 7, up from -2.1 percent on July 1. After this week's releases from the Institute for Supply Management, the US Census Bureau, and the US Bureau of Economic Analysis, the nowcasts of second-quarter real personal consumption expenditures growth and real gross private domestic investment growth increased from 0.8 percent and -15.1 percent, respectively, to 1.3 percent and -14.9 percent, respectively, while the nowcast of the contribution of the change in real net exports to second-quarter GDP growth decreased from 0.38 percentage points to 0.21 percentage points.

Real Final Sales

Most eyes are on the headline number, but that's not what one should be watching. The important number is Real Final Sales (RFS). It's the true bottom line number for the economy. 

I am confident a recession is underway, but I am not confident as to the start month.

If RFS comes in negative for the quarter, the recession may have started in the first quarter.

If not, then I will guess May given relatively strong but revised lower retail sales in April. 

Looking Ahead to June

That subtitle looks strange given that it's now July 7, but the economic reports for June are still coming in. 

Key reports on retail sales, ISM, new home sales, existing home sales, CPI, PCE, income, and a jobs report are all yet to to. 

Data-wise, there's still a month coming. 

What About Jobs?

We have jobs report tomorrow, but unless it's very soft, I doubt it matters much.

Every day I see Tweets from people saying we are creating too many jobs for there to be a recession. 

However, most of the rest of the data, the bond market , and commodity prices are all screaming recession. 

Rate Hikes

Pick a date, or one of mine, or none at all, but this economy is sinking fast. And the Fed has penciled in another rate hike.

CME Fedwatch has the odds of another three-quarter point hike at 93.9%, up from 82.6% a week ago.

I concur with the assessment. The stock market shrugging this hike off does little but incentivize the Fed to go with these hikes.

The next decision is on July 29, about three weeks from now. Even if we are borderline recession now, another 75 basis point hike ought to do the trick. 

Given the lagging nature of hikes, lagging nature of jobs, and a tight labor market, the Fed is likely to overshoot. A 75 basis point hike to 2.25-2.50% could do it. 

I am sure the Fed will be far over the line if the Fed gets to its target of 3.25% by December. 

Inflation Expectations Nonsense 

The Fed is worried about inflation expectations, a nonsensical idea. That worry is also likely to cause the Fed to tighten too much.

For discussion, please see Still More Inflation Expectations Nonsense in the Latest Fed Minutes

Expect a Long But Shallow Recession With Minimal Job Losses

From a jobs standpoint I expect a Long But Shallow Recession With Minimal Job Losses. 

From a stock market perspective, I expect things will be brutal.

For discussion, please see Artificial Wealth vs GDP: Why Earnings and the Stock Market Will Get Crushed

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