Third Quarter GDP: What We Know So Far

One month of data for the third quarter is in. The reports are mixed but the number of negative headlines exceeds the number of positive ones.

Let’s start with more numbers from today before finishing off with what we know so far.

The Census Bureau Report on Advance Economic Indicators shows wholesale inventories rose 0.4% in July.

Retail inventories fell by 0.2% from an unrevised June estimate. The Census Bureau revised wholesale inventories slightly lower from 0.7% to 0.6%.

Wholesale inventories gave a late upward boost to second quarter GDP.

Average this out and you have a 0.1% rise in both wholesale and retail inventories or 0.2% in one and nothing in the other.

This is a slight positive to third quarter GDP, subject to revisions, and further subject to Hurricane Harvey disruptions.

Slow Start to Third Quarter

So far, the third quarter is not off to a great start.

The housing reports were worse than expected, today’s reports on international trade and inventories will not impact GDP much, the durable goods report was mixed despite a miserable headline number, and industrial production was weak.

• August 28: Trade Deficit Increases Slightly
• August 25: Durable Goods Orders Decline 6.8% Led by Aircraft
• August 24: Existing Home Sales Unexpectedly Decline to 2017 Lows
• August 23: New Home Sales Plunge to Lowest Annualized Pace in Three Years
• August 20: Deep Subprime Auto Loan Delinquencies Reach 2007 Levels: The Next Big Short?
• August 17: Unexpectedly Weak Industrial Production Report Released Unexpectedly Early
• August 16: Housing Starts Unexpectedly Sink, Multi-Family in Huge 34% Retreat Year-Over-Year
• August 15: Retail Sales Bounce: Upward Revisions Explain Strength in 2nd Quarter GDP
• August 15: Serious Credit Card Delinquencies Rise for the Third Straight Quarter: Trend Not Seen Since 2009
• August 14: Consumer Spending Expectations Down Again: Dear Fed, Why Don’t You Believe Your Own Survey?
• August 11: CPI Weak, Prices of Autos, Lodging Away From Home Drop: Econoday Cheers Rising Medical and Apparel Prices

Retail spending rose sharply in July, assuming one actually believes the August 15 Census Bureau report on retail spending that shows auto sales rose 1.2%. I don’t.

Cracks such as rising credit card delinquencies and more believable report on slowing auto sales have popped up.

Finally, Trump’s increasingly belligerent position on trade is very worrying. For details, please see Trump Rant of the Day: “I want tariffs. Bring me some tariffs!”

Mike “Mish” Shedlock