Early in the quarter, there was talk of a Trumpian 5% GDP in the third quarter. The low- to mid-3s is more likely.
Compared to early projections, more believable GDP forecasts are now in the works, at least for GDPNow. I suspect GDPNow is still a bit high, and Nowcast more than a bit low.
I will take a stab at 3.2%. But that's not the number that really matters.
Real final sales is the true measure of GDP. Inventory builds net to zero contribution over time. That's what to watch tomorrow.
GDPNow has real final sales at 1.5%. That's less than half of its early peak. Nowcast does not separate out real final sales.
Throughout the quarter, the most static thing has been GDPNow's inventory build estimate. It's now 2.1 percentage points.
If we do have 2 points of inventory growth, there will be payback in the 4th quarter of 2018 or the 1st quarter of next year.
Why the Inventory Build?
- We had a huge inventory build in anticipation of retail sales that may not happen.
- Companies likely stockpiled as much stuff as they could ahead of Trump tariffs.
Both reasons are in play.
On Friday, we find out just how big this inventory build has been.