As I watch the evolution of consumer spending, housing starts, new home sales, and GDPNow trends, it appears the economy has peaked. Warning: I tend to be early.
The GDPNow forecast has been weakening since a peak of 4.2 percent on May 8, 2024.
The best number to follow is not the overall forecast but rather Real Final Sales (RFS). The rest is inventory adjustment that nets to zero over time.
A steep plunge occurred in the base forecast from 3.5 to 2.7 then to 1.8 on May 1 and June 3. Importantly, RFS fell from 2.9 to 2.1 to 1.8 on the same dates.
Balance of Trade
I made that call on May 30.
On June 1, I commented Soaring US Trade Deficit Smacks the Atlanta Fed GDPNow Forecast
On June 3, the GDPNow forecast took another dive.
The following table that shows both moves.
GDPnow Contributions
Advance Economic Indicators, specifically import-export data took the Net Exports contribution to GDP from -0.06 to -0.60 on May 31.
Also on May 31, Personal Income and Outlays took the contribution for Personal Consumption Expenditures (PCE) from 2.28 to 1.75.
It’s not always easy to assign the numbers to specific buckets, but the plunge in net exports is clear.
ISM Manufacturing New Orders and Backlogs in Steep Contraction
On June 3, I commented ISM Manufacturing New Orders and Backlogs in Steep Contraction
The Manufacturing ISM was in contraction for 16 months went positive for a month and is contracting again for two months with order backlogs falling for 20 months.
June 3 Impact to GDPNow
On June 3, the ISM and construction spending reports clobbered PCE with lesser negative impacts on Residential Investments, Equipment, and Net Exports.
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