- The blue line is the base forecast. It’s all the public sees or hears when the BEA releases its GDP report, but it’s not what matters most.
- The red line is actual final sales (RFS). This is the bottom line estimate for the economy and what matters most.
- The yellow line is RFS for domestic buyers, the rest is for exports.
- The green line is RFS for private national buyers. It excludes government and exports.
Actual final sales are the true net income performance for the quarter. The difference between the benchmark report and the RFS is the inventories that reduce to zero over time.
The mainstream media tracks the base number, not what matters most.
Current GDPNow estimate
Please consider the December 1 update to the GDPNow forecast for fourth quarter 2022 GDP.
The GDPNow model’s estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2022 is 2.8% on December 1, down from 4.3% on November 23. Following recent releases from the US Census Bureau, the US Bureau of Economic Analysis, and the Institute for Supply Management, a decline in the nowcast for real personal consumption expenditure growth in the fourth quarter from 4.8% to 3, 2 percent was slightly offset by an increase in the now forecast for growth in gross private domestic investment in the fourth quarter from 1.0 percent to 2.0 percent. Moreover, the nowcast of the contribution of the change in real net exports to real GDP growth in the fourth quarter fell from 0.64 percentage points to 0.16 percentage points.
Spotlight on current figures
- Base number: 2.8%
- RFS: 2.4%
- Domestic RFS: 2.1%
- Private Domestic RFS: 2.4%
Increase in real income and expenditure in October
I’ll take a closer look at income and expenses, but it’s the month-to-month changes that drive GDPNow’s forecast.
Real personal consumption expenditure jumped 0.5% in October. Real means adjusted for inflation. Nominal expenditure increased by 0.8% with inflation of 0.3 percentage point.
Still, GDPNow’s forecast dipped due to heavy spending in August and October, but soared in September.
August and September were for the third quarter, but here are the internal details of the December 1 GDPNow report (main chart).
GDPNow Key Releases for Q4 2022
Major contribution to changes in GDP
- PCE: From 3.29 to 2.18
- Equipment: From 0.46 to 0.74
- Non-residential structures: from 0.02 to -0.13
- Residential structures: from -0.87 to -1.01
The GDPNow report tracked the ISM release, leading economic indicators and personal income reports.
Advanced business data
Scroll to continue
Please take into account the anticipated monthly trade data from the Commerce Department.
Prior business details
- The international trade deficit stood at $99.0 billion in October, up $7.1 billion from $91.9 billion in September.
- Goods exports in October totaled $173.7 billion, down $4.7 billion from September exports.
- Goods imports in October totaled $272.7 billion, up $2.4 billion from September imports.
- Exports fell 2.6% and imports rose 0.9%.
A similar pattern occurred in August. But in September (highlighted yellow in the chart of real income and spending), imports fell and exports rose.
Consumers spent more, but on imports.
However, it is not the data that matters, but what the model expected that matters. The GDPNow model did not anticipate this commercial reversal.
On November 23, the current GDP forecast for residential investment fell from -0.59 to -0.88 and continued to dip for obvious reasons. It is now -1.01.
Curiously, despite the alleged rebound in new home sales on Nov. 23, the GDPNow model has gone the other way.
The model expected more or negative reviews mattered more. Either way, I highly doubt there was much of a bounce.
Cancellations are around 25% and the census service does not take cancellations into account in its data. The margin of error on housing reports is enormous.
Sales of new homes
- Sales of new single-family homes in October 2022 were at a seasonally adjusted annual rate of 632,000, according to estimates released jointly today by the US Census Bureau and the Department of Housing and Urban Development.
- It’s 7.5 percent (±20.8%)* above September’s revised rate of 588,000, but is 5.8% (±19.6%)* below the October 2021 estimate of 671,000.
- In September, I reported that new home sales jumped 28% in August to 685,000. But today we see the number is 661,000.
- This month, the Census Department revised September from 603,000 to 588,000.
Note the margin of error in these ratios ±20%!
The Census Department doesn’t have much confidence in its estimates and neither do I.
See the links above for more details and discussion.
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