Review of August 2024 data, 2Q GDP, PCE and personal income

The monthly summary continues to improve, although PCE ex food and energy inflation numbers continue to be a concern.

A lot of hoopla about the overall, but that PCE ex-F&E edged upward.

Now for the revisions in previous months...

Personal income, etc. is shown here.

The GDP 3rd estimate can be found here.

Note the uptick in the trade deficit. A part of that may be the front loading of imports in preparation of possible East and Gulf Coast port strike, possible on 10-1. Both sides seem to be playing chicken at this point. Each day of a strike would in theory... hamper $4.5 in imports and $2.8B in exports. 

That front loading should likely have a bit of drag on 3rd Quarter GDP, but certainly not like the 1st half of 2022... which was almost entirely responsible for those back to back negative quarters.

By end of October, we will have the first glimpse of 3Q GDP and whether there was a strike.

Review of July 2024 data, 2Q GDP, PCE and personal income

The monthly summary continues to improve, although PPI numbers continue to be a concern... going forward. 

Regarding personal income, etc., read here.

The 2nd quarter GDP was revised upward. I was puzzled by the statement regarding consumer spending and thus the headlines of resilient consumers. I would have expected consumer spending to be at or above the overall GDP announcement. 

But that is just me. It is an election year and important to convince the consumers... they are doing well.

Oh Joy!

Review of June 2024 data, 2Q GDP, PCE and personal income

The monthly summary continues to improve, although PPI numbers continue to be a concern... going forward.

Regarding personal income, etc., read here.

The 2nd quarter GDP came in above expectations at 2.8% annualized. I was puzzled by the slower growth in Services at 2.2% annualized, which helps explain the 2.3% annualized for personal consumption. Durable goods up 4.6% and nondurables at 1.4%, both annualized.

Overall a good report, but I would be a bit concerned if fixed investment can continue its expansion, which is equipment driven, while inventories keep building.

As for the PCE excluding food and energy... not much movement. Granted the market is anticipating a rate cut in September... and it might be warranted. A string of rate cuts might not be so warranted, imho. 

We can start the cycle again for next month, with the likelihood of CPI being at or slightly above this past month's reading. 

Review of May 2024 data, 1Q GDP revisions, PCE and personal income

The monthly summary continues to improve, although PPI numbers are of concern... going forward.

Regarding personal income, etc., read here.

The GDP for 2024Q1 was revised ever so slightly upward to 1.4% annualized. Only time will tell if that gets revised on September 26th.

Review of April 2024 data, 1Q GDP revisions, PCE and personal income

The monthly summary is not so bad, actually.

The best that can be said, is inflation has stabilized, with a further slowing in the cards, by end of the year.

What is striking, is the downward tilt in disposable income AND personal consumption expenditures.

If you carefully look, the previous month was also revised downward, for those two items.

If spending is slowing, it would follow that demand is slowing, which would/should... slow inflation going forward.

As for the GDP revision... it was not unexpected. The story has now become the service sector. Not terribly worrisome, but what caught my eye, is the trade imbalance, which jumped. 

Oh well, that's a wrap for May.

Review of March 2024 data, 1Q GDP, PCE and personal income

The monthly summary is not so wonderful, incomparison...

Inside all that pink is some troubling food related issues. Even though energy is somewhat in a narrow band, the food outlook is upward. The CPI-U expectations for the report on April, seemingly indicates a repeat of Mar-2024, outpacing the monthly core, although core is expected to ease a bit. Still above the overall CPI-U.

As for the personal income arena... this is the link... https://www.bea.gov/news/2024/personal-income-and-outlays-march-2024

There seems to be quite a jump in spending, versus Disposable personal income... for 2 consecutive months. Not sure there was much cash on hand, so the disposable is likely in the form of additional debt. 

Of course the above report mentioned a rise in goods. Perhaps it did, but the 1Q GDP did not reflect that. 

As for GDP, it now stands at 1.6% annualized for 1Q2024. The Trade deficit loomed large in the quarter and shows no signs of abating.

The reports for the month, ended up in so-so territory, imho. I am sure it will get spun hard in each direction. 

Review of February 2024 data, 4Q GDP Revision, PCE and personal income

The monthly summary...

The overall PCE edged upward, on annual basis, with PCE ex food and energy staying flat. 

Of course, the official got revised up for January, which indicates a difference from my report...

As for the personal income arena... this is the link... https://www.bea.gov/news/2024/personal-income-and-outlays-february-2024

Note the revisions as always, and I would recommend tracking the data monthly. Revisions are normal part of the cycle, as more data comes in. Recently however... previous data seems to come in a tad lower, which results in inflated current estimates. This was not always the case.

As for GDP, it seems to have edged up for 2023-4Q. I am not going to beat that horse over trade deficit numbers. I will simply state that prior to transfer of data from 2012 dollars into 2017 dollars, the GDP was marginally better. That adjustment amounts to about 1.9% annualized. So just take that with a grain of salt, as it is just my opinion.

One remaining bit of info can be found here. While I might harangue about the national debt, the 2023 year end net international investment was released. UGLY, at almost $20T. THAT IS WHAT WE OWE OTHER COUNTRIES.

https://fred.stlouisfed.org/series/IIPUSNETIQ

Review of January 2024 data, 4Q GDP Revision, PCE and personal income

The monthly summary...

The downward shift in inflation continues across the board, with the exception of my price index, which is more about healthcare than any other weightings.

There were modest revisions in the PCE report, which are highlighted in Red.

I have made much of government spending on the GDP, but historically... not so abnormal (all charts from 2000Q1 onward...

A bit grainy in the upload, but trends are evident. The worrying factor is the trade deficit, while showing a bit of improvement the past few months, is still staggering compared to 10 years ago.

Bored silly, so will leave it there. 

Review of December 2023 data, 4Q GDP, PCE and personal income

Alas, 2023 reports have concluded. The GDP's 4Q advance reading indicates a sterling 3.1% rise. I will make mention of the 5 year Quinquennial revision from 2012 dollars to 2017 dollars. As would be expected the numbers jumped 9.0%. I can't help but notice the big drag on GDP of net exports of good and services, slid a whopping -26.7%. 

Even under the revised numbers, that latter component fell another -5.9% from one year ago.

PCE, which is typically 68.7% of GDP under the 2017 revision, made up 58.3% of that yearly increase. 

Which gives pause to the notion of the consumer driving those GDP numbers, when in fact they appear to have been a bit of drag.

Gross private investment, also underperformed. The real over achievers were government and net exports of good and services. 

It is what it is.

PCE ex. food and energy ease from 3.4% to 3.2%. The overall remained unchanged.

All in all, a decent end to the 2023 years.

Review of November 2023 data, GDP, PCE and personal income

 I'll try not to harp about this too much. The BEA switched from 2012 dollars to 2017 dollars for 3Q23, and adjusted prior data. I download all such reports, so I can easily tell the difference.

The trade deficit is a drag on GDP, thus in the 2Q23 original report, that drag was -5.95%. As of right now, after those adjustments... the drag is-4.14%. Quite an improvement. The stated +4.9% GDP is a catch up to what can only be viewed as under-reporting of previous quarters. 

How that change affects going forward, is uncertain to me. Given the wide array of expectations for 4Q23, I am thinking not everyone is on the same page. I am done harping about this.

Now on to the PCE report, after reviewing adjustments...

Yes, inflation is slowing, not deflating, with the exception of gasoline, which looks to have stopped falling.

The monthly summary...

All in all, a pretty good monthly report card. I do think the market is making too big a deal on expectations of the FED cutting rates before summer, but what do I know?

A Further Review of 3rd Quarter, 2023 GDP... just for fun!!

So yes, the GDP was revised to 5.2% annualized, from 4.9% annualized. That does not mean the economy is robust. It's not bad, but robust is a bit of hype for politicians.

The BEA moved from 2012 dollars to 2017 dollars for the 3rd quarter releases and going forward, until next change in... say 5 years.

In theory, it should have been even across the board, after compensating for 5 years of dollar value adjustments, etc. Such as inflation being about 7.5% during that 5 year period.

If only there was someone, somewhere that downloads those excel spreadsheets from each GDP iteration.

Voila...

Note the column headings for 2012 dollars and 2017 dollars AND the % Change. The changes were clearly not uniform across the various groupings.

While there was a 9% upward adjustment, several groupings failed to match that rise, including some that went negative... while others outpaced the 9% reading.

So in theory, all the numbers going back in time were revised to reflect the current situation. But again, that was very uneven. Just consider the trade deficit, which is a drag on GDP... and those changes.

All in all, it did distort the 3rd quarter readings and possibly provided a misleading annualized number. That would be no big deal... if not for an election year and people willing to make everything political. 

While the current 5.2% annualized is being hailed as something significant, I wonder what will be hailed, when the 4th Qtr. 2023 is revealed on January 25th, 2024. My guess is way below that 5.2%. Back to the 2.0% annualized, or even lower!  

One can imagine the hysteria over such falling numbers, but the adjustment was improperly attributed to a "robust" economy.

So remember... the trade deficit, which is a drag on GDP was revised dramatically lower, after the BIG change for 2012 to 2017 dollars. That trade deficit adjustment was about 100% of that 5.2% annualized, or ±0.1% annualized without that lone adjustment.

You think I might be off my rocker! The current Real GDP rolls in at 22,506.4B, which is a hefty 281B above the 2nd qtr. figure of  22,225.4B. Now take a look at that downward revision of the trade deficit,  -284B. 

Remember the trade deficit is a drag on GDP, so a downward revision in the Trade deficit would result in a higher GDP print. IF the GDP had not been revised downward by -284B, then that +281B gain in GDP would evaporate. As in +0.1% annualized.

Oh well! It is just numbers and you can believe what you want. However... that adjustment was one time only, for the time being and 4Q23 will be significantly lower, imho. How does a drop off from +5.2% annualized to say +1.7% annualized look in an election year. 

One group will claim the economy is crashing into a recession, another group will be saying soft landing is working, and another group will be screaming the FED must cut rates rapidly.

I then ask you, if stating the 3Q23 was actually 0.1% and the 4Q24 was +1.7%, would indeed indicate a possible soft landing. Of course, the groups would likely being crying the same thing... just 3 months earlier.

It is fun to watch all the spin!

Review of October 2023 data, GDP, PCE and personal income

Just some charts with a bit of commentary...

The headlines proclaimed a resilient consumer propelled the advance estimate of 4.9% annualized... to 5.2%. Seriously, the PCE slipped from 4.0% to 3.6%. You could toss in Residential investment, but you still come up lacking. 

It was a good report, but could have done without the spin, imho.

A couple of charts about PCE. Adjustments are in red. Again, a good report.

And to finish up the charts...

October ended up being an all around good month. May it continue.

GDP 2Q, 2022 2nd Est., PCE, Income and Outlays, Inflation Summary and Opinions!

The BEA released the 2nd estimate of GDP and it was revised to -0.6% annualized. You can read the link at your leisure. I am not going to yap about the data or the verbiage in the release. 

What did amaze me, was a ripple in the news about the trade deficit. Here is my updated trade deficit drag on GDP...

Click to Enlarge

The media has been reluctant to mention trade deficits, so it was a surprise to see it noted on my twitter feed. 6 straight quarters of record trade deficits to GDP and someone noticed. Also, the dollar rise seems to have awakened some, after 4 quarters of rises... amounting to 17.2% increase.

This was all yesterday's news, so onto the Personal Income and Outlays...

Personal income increased $47.0 billion (0.2 percent) in July, according to estimates released today by the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) increased $37.6 billion (0.2 percent) and personal consumption expenditures (PCE) increased $23.7 billion (0.1 percent).

The PCE price index decreased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent (table 9). Real DPI increased 0.3 percent in July and real PCE increased 0.2 percent; goods increased 0.2 percent and services increased 0.2 percent (tables 5 and 7).

Click to Enlarge

Note that June numbers were revised upward, 0.1% on the DPI and downward of PCE. In any case, the expenditures (PCE) is still outpacing the disposable disposable income (DPI). 

Here is a summary of various inflation gauges for July...

Click to Enlarge

It is impossible for me to finish without an opinion, although my opinion is sprinkled throughout.

As I have noted in previous articles, even the BLS stated the flat July reading was totally due to -7.7% change in gasoline prices. I would put the fall for August near the -10% range. It would seem the expectations would be for another flat month or possibly a negative print. 

But... the energy index was down last month -4.5%. There is more to energy than just gasoline as the rise in electricity was +1.9% and piped gas (N/G?) was down -3.9%. I would expect a continuation of electricity rises and a reversal of piped gas... back to increases. 

Also, the SPR release is set to halt at end of October, and OPEC is suggesting production cuts... to stabilize prices!

Diesel prices falling has shifted the past two days and is showing an upward tilt, as fall harvest is now beginning. Gasoline prices continue to fall, but we haven't had a storm in the gulf. Keep an eye on the tropics!  

Speaking of weather... food is rather dependent on the weather, with droughts inhibiting yields, and heavy rains disrupting both planting and harvesting. These weather occurrences are always an issue for someone, somewhere. The frequency and widespread occurrences, are troubling.

Fertilizer is also used to increase yields in crops, and are a global commodity. A lot of natural gas is used in the production of fertilizers. European producers of fertilizers are reducing and/or curtailing production of fertilizers... as natural gas prices have become to high to operate. 

Of course, that would be a European problem, except fertilizers are once again... a global commodity. Research phosphate, nitrogen, potash, anhydrous ammonia, etc. 

While LNG export is limited by infrastructure... these fertilizers are mostly not. So even if there is a good growing season, the cost of raising those crops will increase, due to fuel costs (diesel) and yield enhancing fertilizer.

The old adage "hope for the best, but prepare for the worst", comes to mind. Not that the worst will happen, but let's not become giddy over some short term positives about peaking inflation, etc. 

Or as Yogi said... "it ain't over, till it's over."

GDP, PCE, Income and Outlays, Inflation Summary and July Wrap-up!

 

The real GDP for the 2nd Quarter was released and it was below forecasts. I think it was generally in the 0.8% annualized. My pathetic attempt was 0.6% annualized. The result was -0.9%. The pundits have fixated on the falling inventories, but I noticed the imports/exports did not match expectations. 

The consumer was steadfast in increasing spending, but slowly. (Did I mention real GDP is after adjusting for inflation?)

Here is a bit of history for consumer spending relative to real GDP.

And this is fun with numbers, which is consumer spending after taking out a major contributor or detriment to GDP. I'll let you guess what that is.

While the consumer edged up, and some gains in net export, Gross Private Domestic Investment was the big drag, it was the inventory numbers that pulled it down by $107B from last quarter. That was the surprise for many people and the difference between the result and what was forecast. 

Then we have Personal Income and Outlays, which...

Personal income increased $133.5 billion (0.6 percent) in June, according to estimates released today by the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) increased $120.4 billion (0.7 percent) and personal consumption expenditures (PCE) increased $181.1 billion (1.1 percent).

The PCE price index increased 1.0 percent. Excluding food and energy, the PCE price index increased 0.6 percent (table 9). Real DPI decreased 0.3 percent in June and real PCE increased 0.1 percent; goods increased 0.1 percent and services increased 0.1 percent (tables 5 and 7). (emphasis added)

Even with disposable income sliding after inflation adjustments, the consumption increased after inflation adjustments. Borrowing?

Then the various inflation numbers...

Not much to be enthusiastic about. It would appear that some of the forecasts are starting to downgrade inflation number for July and I would tend to agree. At best it would seem to have peaked. 

As to whether we are in a recession or not... the idea of "technical" recession is an imported idea. The U.S. has never jumped on the 2 quarter as recession bandwagon. Harken back to the Great Recession. It was deemed the U.S. started into recession in December 2007, yet we did not have back to back negative GDP, until 3rd and 4th quarter 2008.

I would think we are likely heading into a recession, but not at the moment. Then the issue is how long and how deep? 

So good luck and on to next month's data. 

End of the Month... June 2022

Okay, it is the end of June. Time for a recap of data published this month for May by the really smart guys, with comments by a really dumb person (me).

First up is the various inflation gauges...

(Note that I have estimated the Eurostat for the USA, as the official data has not been published.)

Not much relief in the inflation outlook, although demand destruction is becoming evident in certain core areas. Even gasoline and diesel usage seems to be tapering off. Prices maybe not so much... but exports are still outweighing imports.

The personal income and outlays suggest a reason for this. (click to enlarge)

Is it a one month anomaly or the start of a trend? It's possible the old adage of not being able to get blood from a turnip... may be in play.

Now on to GDP. Which slid from -1.5% to 1.6%, and the headlines are about consumer spending decreasing from +3.1% in the 2nd reading and now at +1.8%. It's the consumers fault!! The consumers still remained positive in expenditures and overall GDP fell. Aren't we overlooking that 800lb. Gorilla?

I can remember when the consumers were 60% of the economy; then 65%; then 2/3's; and now 70%. That 70% gets stated as something normal, which it isn't...

That's since early in the 80's, so what might have changed? Let me back out some numbers and see what it might look like in "fun with numbers". (You can guess what I backed out)!

The line edges up in "fun with numbers", but not like the first graph. We can't speak of that, as it is politically sensitive. The bottom line... we did this to ourselves.

I can't really say whether the 2nd Qtr. GDP will be better or worse, but 2nd quarter is over with today, so it is only a matter of waiting for the 1st read at end of July. Frankly, I think it will be positive for 2nd quarter, but the ship is starting to tilt, in my opinion. 

I can distinctly remember discussion of whether or not we were in a recession in spring 2008. I am not sure when the decision was finally made of it starting in December of 2007. It seems it was given that date after the recession "ended" in June of 2009. 

So we won't officially know whether we are in a recession, until it is over, or when the fat lady sings.  

End of the Month... April 2022 PCE, 2nd est. GDP, and Other Stuff.

 

The final results for April data is now in and it looks like a mixed bag. Sure the headline numbers are indicating deceleration of inflation, but there are still problem areas. The most important being my price index, which is increasing. I have highlighted some areas of acceleration of inflation. 

Remember that energy was flat for April and has risen in May, which comes out next month. The deceleration of inflation in overall CPI indicates a potential repeat of the April headline number. The core, which is without food and energy, indicates some moderation. We'll just have to wait. 

The Personal Income and Outlays for April came out and it isn't stellar in my opinion. Personal consumption expenditures were up 0.7% for the inflation adjusted month to month. The disposable personal income was flat on the inflation adjusted month to month. Credit cards anyone?

Somehow the concept of driving 120 mph on an ice covered road comes to mind, with a slight decrease in overall speed. Then the FED is slightly tapping the brakes. What could go wrong?

In other news, the 2nd release of the 1st Quarter GDP indicated a bit less than the Advance. I have read some comments about a potential negative 2nd quarter as meaning we are in a recession. WRONG! It is just a symptom. 2020 saw two quarters and no recession, as discussed by the gurus of such stuff. After debating most of 2008, it was finally decided that December of 2007, was the start of the great recession. The first back to back negative quarters were 3rd and 4th Quarter of 2008. So clearly more information than GDP numbers are a factor.

As for the 2nd quarter GDP, which will not be released until end of July... there is ample reason to believe it will not be negative. The trade numbers were a major hit to the 1st quarter GDP. The dollar has strengthened, which should reduce the deficit numbers, the inventory builds should be increasing, which is a plus for GDP, although troubling. The trade deficit should also be waning, due to a potential China slowdown.

So a positive number for GDP 2nd Quarter is in the offing... but that does not mean the economy is doing peachy keen. That expected positive inventory gain, could be a sign of demand destruction. With energy prices taking a bite out of disposable income, consumers will likely dial back in other areas.

So the outlook is a mixed bag in my opinion. A mixed bag is better than all negative, so there is some room for optimism. 

Have a good holiday!!

Positive Spins?

Yesterday gave us the initial 3rd qtr. GDP reading from the BEA, and while it was far below original expectations, it could be explained away as an anomaly, due to the obvious drop in goods, maybe from reduced car sales, supply chain disruptions, etc. Meaning not all is lost for the 4th qtr.

Today gives us the Bureau and Labor Statistics release of Employment Cost Index Summary. It was good news for wages since 3 months ago, with wages up 1.5%, compared to about 1% in inflation (BLS CPI). Year over year is still lagging as wages are 4.2% over last year, while inflation is 5.4% (BLS CPI) over the same period. 

It could be stated with reasonable certainty that wages are on the uptick and outpacing inflation. They will need to keep a healthy rise, as forecast for October inflation results is in the 5.7%~5.8% range. Not sure if rising wages can keep up with that pace, as the producers are pushing the additional cost downstream. That was reflected in last month's PPI report from the BLS.

Then there is the matter of the BEA's Personal Income and Outlays, September 2021. The troubling number would be the inflation adjusted disposable personal income drop of -1.6% in one month (current dollars). This is explained away as a decrease in government social benefits. This as personal income also dropped -1.0% in one month, also in current dollars. 

Personal consumption expenditures slowed from the August increase of 0.6% (chained dollars) to September's 0.3% (chained dollars).

It is that inflation adjusted -1.6% drop in disposable income that should be concerning going forward. How does that translate to continued goods and services improvement? It should be noted that a large part of the GDP improvement has been borne by the consumer, with their pct. of total GDP rising during the past 6 quarters. 

I guess time will tell, but attempts to put a positive spin on all of this will just have to wait.