The GDPnow Nowcast for the first quarter took a dive on February 14. Weather-related utility production lessened the blow.
There were three significant reports on February 14: Retail Sales, Industrial Production, and Import-Export Prices.
Import-Export Prices did not seem to matter.
Contributions to GDP
- The report shows PCE goods fell by 0.75 percentage points which I attribute to retail sales.
- The report shows PCE services rose by 0.37 percentage points which I attribute to Industrial Production Utilities.
- Gross Private Domestic Investment fell by 0.22 percentage points which I attribute to other Industrial Production numbers.
- The net of the above is -0.60 percentage points which we see in Real Final Sales but only -0.50 in overall GDP.
The above math is never exact because numbers influence each other.
And on days with multiple reports, assigning percentages can be difficult, but these are clear.
Real Final Sales
The important number is RFS, not the base forecast. The difference is inventory adjustment which nets to zero over time.
It would make much more sense in reporting for the BEA to post RFS and ignore the base number. How about GDP and GDPIA where IA means inventory adjustment?
For the preceding two quarters RFS was higher than base GDP so GDP was better than widely reported. This month, the inventory adjustment is positive so RFS is lower.
1.9 is the current bottom-line estimate for the economy.
The NBER is not going to declare a recession on two quarters of negative GDP if the only reason GDP is negative is IA. Very few people understand this.
Related Posts
February 14, 2025: Retail Sales Crash – Did the Consumer Finally Throw in the Towel?
The Census Department shows huge across-the-board declines in multiple categories, down 0.9 percent overall.
February 15, 2025: Industrial Production Jumps 0.5 Percent But Details Are Ugly
A cold snap boosted utilities by a whopping 7.2 percent.
Retail sales fell 0.9 percent but due to a hot CPI report, real (inflation-adjusted) sales fell 1.3 percent. It’s real retail sales, not nominal, that drive GDP. Please click on the above link for details.
That was the bulk of the decline in GDPNow. Cold weather helped utilities, easing the pain.