follow up Jim’s post, some additional commentary on the Q1 GDP growth surprise of -1.4% SAAR; GDPNow was 0.4% and IHS-Markit was -0.6% (well below the Bloomberg consensus of 1.1%). What can you get out of it?
figure 1: GDP (black), Atlanta Fed nowcast as of April 27 (pink squares), Wall Street Journal April survey mean forecast (red line) and final domestic product sales (brown), all in 2012 $1 billion , SAAR. Recession dates as defined by NBER are shaded from peak to trough in gray. Source: BEA 2022Q1 advance release, Atlanta Fed, WSJ April survey, and author’s calculations.
Jim’s post on GDP Noting that imports are an important driver, and there are some problems with oil exports. It’s important to remember that there are a lot of estimation components in the advance GDP numbers; for example, trade data for March was finalized after the advance GDP release. Therefore, data released at the end of May will show revisions to GDP and components.
source: Bank of East Asia (2021).
The mean absolute revision (MAR) from advance to second release was 0.5 percentage points, and from advance to third (in this case, the June release) was 0.6 percentage points. When the dust settles a few years after the early release, the MAR is 1.2 percentage points… However, for now, we can reasonably be certain that Q1 GDP growth will be negative.
While we care about aggregate production (i.e. GDP), we may care more about aggregate demand (expenditure deducting inventory). On the other hand, as shown in Figure 1, final sales of domestic products (ie, GDP net of changes in inventories) fell by only 0.6 percentage points (SAAR). CEA highlights Final sales to domestic buyers (C+I+G – change in inventory) as a measure of domestic momentum; SAAR rose 3.7%. Some observers are comforted by this (including consumption growth that continued into March):
figure 2: Nonfarm Payrolls (Dark Blue), Bloomberg Consensus for April NFP (Blue+), Industrial Production (Red), 2012 USD excluding Transferred Personal Income (Green), 2012 USD Manufacturing and trade sales (black), consumption of Ch.2012$ (light blue) and monthly GDP of Ch.2012$ (pink), all normalized to 2020M02=0. NBER defines recession dates, peaks and valleys, shades of gray. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (published April 1, 2022), NBER, and author’s calculations.
Most tracking estimates for the second quarter are around 2% based on currently available data (IHS-Markit, GDPNow).
