July 17, 2018

2Q18 GDP Estimates Update: Stronger Going into the Home Stretch

Filed under: Economy,Taxes & Government — Tom @ 12:57 pm

Yesterday’s retail sales data and generally good news about Industrial Production pushed two of the key estimates above 4 percent:

  • Atlanta Federal Reserve — Now projecting an annualized 4.5 percent.
  • Moody’s — Now at 4.1 percent for Moody’s own estimate and the CNBC consensus.
  • The New York Fed is at 2.77 percent, but that’s as of Friday, before the Monday retail sales and industrial production releases.

Additionally, IHS Markit/Macro Advisers (downloadable Excel spreadsheet is at the page’s “Monthly GDP Index: Historical Data” link) is projecting 5.3 percent annualized second-quarter growth. They’ve already estimated that April’s and May’s raw monthly economic growth (but inflation-adjusted) was a combined 1.25 percent, and believe that June will come in at 0.1 percent. That seems to annualize to a bit more than 5.3 percent; I hope to get an answer about that shortly.

Additionally Macro Advisers’ estimate was as of June 27, and the second quarter-related economic news published since then points towards June being stronger than the firm believed three weeks ago.

The government’s first estimate for 2Q18 GDP, which will include comprehensive revisions to prior years and quarters, will be released on July 27.

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4 Comments

  1. Meaning that another million American adults will be graduating from SNAP to have their opportunity back by election day. That doesn’t bode well for Democrats. I believe the blue wave will be a drowning of the Dem party. Cowabonga!

    Comment by dscott — July 18, 2018 @ 11:45 am

  2. There are good reasons to doubt the blue wave scenario, and food stamp enrollment declines might further diminish it, but the bigger issue is that there’s no coherent reason why enrollment should still be at 39.6 million. That’s at least 10 million greater than it should be compared to 2006-2007 (population-adjusted):

    https://fns-prod.azureedge.net/sites/default/files/pd/SNAPsummary-07.pdf

    And there’s really no good reason why SNAP enrollment increased by about 50 percent from 2001 to 2006 as the economy improved. So maybe the over-enrollment is more like 15 million.

    Comment by Tom — July 18, 2018 @ 11:54 am

  3. #2, agreed, but the enrollment decline is positive news that those at the bottom who wish to move up have started the exit from government dependency.

    On an interesting note from Zero Hedge:

    https://www.zerohedge.com/news/2018-07-17/russia-liquidates-its-us-treasury-holdings

    Russians have fully liquidated all of their $96 billion in Treasuries. Either they are on a fast burn with the sanctions or they have reinvested their money elsewhere that suits them better .i.e. a capital injection into their economy to jump start it.

    In other words, in just two months, Russia sold a whopping $81BN in treasurys, a liquidation flow that was likely responsible for much if not all the blow out in rates over the period. Because what else happened as Russia was liquidating 85% of its Treasury holdings in 2 months? 10Y yields soared from 2.7% at the start of April to the 7 year high of 3.11% in late May.

    Also interesting speculation: So just like last month, we can’t help but wonder – as the Yuan-denominated oil futures were launched, trade wars were threatened, and as more sanctions were unleashed on Russia – if this wasn’t a dress-rehearsal, carefully coordinated with Beijing to field test what would happen if/when China also starts to liquidate its own Treasury holdings.

    Wondering what a trillion dollar Chinese liquidation would look like? The Fed would buy up everything on the cheap is the answer. As interest rates go up, the face value goes down. Unless all of China’s bonds are inflation protected as Obama’s treasury so foolishly sold them. That would be an ouch. But then the Fed would still be buying them with electronic ones and zeros, meaning trading electrons for actual Dollars. Meaning the Chinese would be forced to buy or trade $1 trillion with others for stuff to repatriate that money to themselves domestically.

    Comment by dscott — July 18, 2018 @ 12:53 pm

  4. #3, the SNAP enrollment decline needs to be “faster, please.”

    Have always wondered when foreign debt holders like China might play their invest-it-elsewhere card. Hope Trump has a plan for that.

    Comment by Tom — July 18, 2018 @ 1:05 pm

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