MacroScope

Here come the downward U.S. GDP revisions again

July 16, 2012

It’s become an uncanny, almost seasonal pattern over the last few years: The economy perks up as a new year kicks into gear only to flail again by the time summer comes around.

It must be that time of year. A very weak U.S. retail sales report for June forced economists to again take an axe to their already meager forecasts for economic growth this year. Stephen Stanley at Pierpoint Securities, suggests the figures are beginning to dip dangerously close to contraction.

I have been near the bottom of the range of estimates on Q2 GDP for the last month or two and it seems like we are all chasing the data lower. Before today, I had about 1% for Q2 real GDP. The awful retail sales figures coupled with somewhat higher-than-expected inventories tally takes me down to +0.6%.

As you can see, I am running out of room with regard to being above zero! I think the consensus was a little over 1½% before today.  I’ve seen some low 1%’s this morning, so I think I remain about ½% below most other estimates.

Stanley sees things staying bad in the second half of the year as well.

The economy has downshifted from muddling to near-stagnation. […]

Given how weak the consumer appears to be after today’s numbers, I am slashing my Q3 numbers as well. A week ago, I was thinking close to 2% for Q3. Now, I have about 1¼%, with most of the downward adjustment occurring in consumer spending.

For JP Morgan economist Mike Feroli, it was the second Q2 GDP revision in under a week – down to 1.4 percent from 1.7 percent last week and 2.0 percent just a few days earlier.

Kevin Logan, chief U.S. economist at HSBC, comes to a similar conclusion:

Consumer spending slowed abruptly in Q2. Consensus estimates of GDP growth in Q2 are likely to be lowered to 1.5% or less, down from growth of +1.9% in Q1. Pressure on the Fed to provide additional monetary accommodation will increase.

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