GDP nowcast (13-Dec-2023)
15-Dec-2023. A perfect time for the FED's pivot: Q4 GDP nowcast jump by 1.66 points to 2.61% The Atlanta GDP model on December 14 showed GDP growth in Q4 2023 at +2.61%. The previous publication on December 7 indicated an increase of only +1.25%. Figure 1. What happened? Mainly strong labor market report for November 2023 (released on December 8), as well as Retail Sales (December 14). Figure 2 shows the contributions to GDP growth in Q4 2023 sequentially on all model dates from December 7 to December 14. The American consumer, i.e. PCE (Personal Consumption Expenditure) contribution increased from 1.32% (on December 7) to 2.02% (December 14). GDPI stands for "Gross Domestic Private Investments".
GDP nowcast (15-Nov-2023)
16-Nov-2023. US Q4 2023 GDP tracker now at +2,20% After yesterday's retail sales data, the Q4 Atlanta GDP tracker was raised a little bit to 2.20% (form 2.05%, consensus of analysts' expectations of GDP growth in Q4 is +0.7%). US October Retail Sales fell 0.1% (exp. -0.3%), with the prior revised up to +0.9% from +0.7%. However, the control group, which feeds into the GDP, was in line with expectations at 0.2% with the prior revised up to 0.7% from 0.6%. As a result, the forecast for growth in PCE consumer spending in Q4 slightly increased from 2.54% to 2.68% in Q4. The consumer is still doing very well (although in Q3 his real spending increased by 3.99%). According to the inventory change forecast, it subtracts as much as 43 bps from the Q4 GDP growth, which means that the “actual increase” of GDP (final sales) in Q4 is +2.64%.
US deficit (Oct-2023)
16-Nov-2023. US Deficit. Yesterday we got the latest data on the revenues, expenses and deficit of the American government in October 2023. If we relate the level of spending to inflation, the current level is consistent with inflation of about 3% - see chart 1. So today's expected inflation reading for X of 3.3% YoY would be consistent with the level of government spending. In October 2023: 1) total receipts amounted to $403.4 billion; +26.6% YoY, +$84.8 billion YoY, and 16.4% (12-month rolling) of nominal GDP (was 16.1% in September 2023), chart 2 2) total outlays amounted to $470.0 billion; +15.7% YoY, +$63.6 billion YoY, and 22.4% (12-month rolling) of nominal GDP (was 22.2% in September 2023), chart 3 3) deficit $66.6 billion; -24.2% YoY, -$21.2 billion YoY, and 6.06% (12-month rolling) of nominal GDP (it was 6.14% in September 2023), chart 4 Historically speaking, spending should fall to 20% of nominal GDP (as before Covid), then from a historical perspective it would be consistent with an inflation level of 2% and below.
CPI vs federal govt spending
23-Oct-2023. CPI vs government spending. Part 2. Since 1929, we have had three waves of increases in US government spending, which have contributed in varying degrees to rising inflation: 1) 1940-45, war expenses, increase in government spending from 9% to 45% of GDP, peak inflation 14.6% (average annual), 2) Years 1965-1982, increase in spending from 16% to 22% of GDP, started with the increase in social spending in the second half of the 1960s and the financing of the Vietnam War (peak inflation 13.6%), 3) 2020 – increase from 21% to 31% (peak inflation 8%). The growth in government spending can be looked at from two sides: to what extent it is pro-cyclical and to what extent anti-cyclical. The increase in spending after the 2008 GFC crisis was largely countercyclical (so less impact on inflation). However, today we know that the increase in spending in 2020 was largely pro-cyclical (i.e. had a stronger impact on inflation). Just as an increase in war-related spending can also be classified as "pro-cyclical" - that is, not due to a recession/slowdown (when higher government spending is more needed to be counter-cyclical).
US consumer spending
17-Aug-2023. What is happening to the American consumer … being the main driver of GDP growth in Q3 2023..? Let's look at the data, but with no judgmental adjustments... Such data are: (i) official GDP data from Q2 2023, and (ii) Atlanta FED model projections for Q3 2023 (quoted from www.atlantafed.org: "the Atlanta Fed GDPNow forecast is a model projection not subject to judgmental adjustments "). Consumer spending (PCE) is expected to increase in real terms by 4.8% in Q3 2023 (or +170 billion USD chained 2012 dollars). This is the strongest percentage increase since Covid (see chart). In Q2 2023 real PCE amounted to USD 14,419 billion, of which USD 8,940 billion was PCE Services and USD 5,615 billion was PCE Goods. In Q3 2023, real PCE Services are expected to grow by 3.70% (+USD 82 billion) and PCE Goods by 7.03% (+USD 96 billion). So the main driver of growth in Q3 is spending on Goods* - which is odd in terms of a standard recession where the drop in PCE Goods is the main contributor to the overall decline in consumer spending (see chart). * PCE Goods are Durable Goods (Motor vehicles and parts, Furnishings and durable household equipment, Recreational goods and vehicles, Other durable goods) and Nondurable goods (Food and beverages purchased for off-premises consumption, Clothing and footwear, Gasoline and other energy goods, Other nondurable goods).
residential & govt spending
18-Aug-2023. US GDP Q3 2023 Forecast – part 2. In addition to the American consumer, the increase in the GDP forecast in Q3 2023 is also due to Residential Investment, which in Q3 grows 11.4% (after the publication of Housing Start for July in the amount of 1452 thousand units), before the publication of Housing Starts the forecast was -0.5%. A large contribution to GDP growth in Q3 is also government spending, which increases in Q3 +2.53% (in Q2 the increase was +2.58%) - so here there are no major changes in the trend. Summing up, the forecast of GDP growth in Q3 of 5.8% is mainly: - US consumer: PCE Services +3.70% in Q3 (+1.70% contribution to GDP growth) - US consumer: PCE Goods +7.03% in Q3 (+1.59% contribution to GDP growth) - Residential Investment +11.36% in Q3 (+0.42% contribution to GDP growth) - Government +2.53% in Q3 (+0.45% contribution to GDP growth) - Change in inventories +USD 59.3 billion in Q3 (+1.13% contribution to GDP growth) Aktywuj, aby wyświetlić większe zdjęcie,
US GDP nowcast +5.76%
US GDP: +5.76% ! According to the Atlanta FED GDPNow model (which is quite accurate), US GDP will grow by as much as 5.76% in Q3. After yesterday's data (retail sales) it was consumer that drove GDP growth (increase in PCE contribution from 2.17% to 2.99%; and GDPI* from 1.37% to 1.49%), today's data on industrial production and housing starts increased mainly Residentials' contribution (from -0.02% to +0.42%) and again consumer (PCE Services contribution from 1.42% to 1.70%). Attached are 3 graphs with the change contribution to the GDP growth in Q3: on August 11 (GDP +4.1%), August 15 (GDP +5.03%) and today (GDP +5.76%). *GDPI - Gross Domestic Private Investments (pl. Krajowe Inwestycje Prywatne Brutto)
US GDP cyclical components
28-Jul-2023. We tend to spend less of our total budget on durable goods and residential investments (which are the most cyclical components of GDP) when expecting trouble ahead or simply when we “can afford less”. That could be a good macro, sort of, leading indicator of a cycle. I mean macro one, so don’t try to time the market with it. The latest data on GDP for Q2 in the US show how much less was spent in Q2 on durable goods and residential investment as a share of total GDP. The combined share dropped a bit from 12,37% in Q1 to 12,20% in Q2. So this is another (at least from a historical perspective) indicator of the slowly approaching recession.. although a decrease of as much as 1.2 percentage points is still needed for the share of these expenses in GDP to only equal the pre-pandemic state, which may take some time ...
