Sunday, November 1, 2015

Boom times!?

Growth! Real GDP growth. Look at the last few data points. That is a solid 2.5% YoY growth, yet potential growth is only 2.2% says the Fed.

I thought 2015 was miserable, what happened?  It was that unexpected Q2 surge in new houses sold, mainly to Chinese buyers.  Capital is controlled over there and tends to escape in volatile bunches.  Then the housewives bunch up and target a particular region using Chinese brokers.  Thus a lot of sales suddenly show up but, quite correctly, much of the housing activity took place in the quarter before and after. House building is a nine month stint. So we got data smoothing in the revisions and Q1-Q3 look fair to middling. The Atlanta Nowcast machine has us at 2.5% YoY, they have restarted the plot for Q4.

Do not be fooled.  This Q3 was really about 1.2% or so, and we started Q4 with a .8; all unrevised numbers.  So much of the good news relies on coefficients, and those coefficients will be plenty inaccurate from now until spring 2016. First, we have White Noise Christmas, numbers are unreliable until late Feb. Second, we have the Q1 downturn problem, and the bean counters do not understand what it is. And we have the trade downturn, quite severe.  We may avoid a grey bar, on a technicality, but we will be one revision away from a recession in spring.

No comments: