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December 15, 2018 | GDPNow Forecast Surges to 3.0% on Retail Sales, Nowcast Flat at 2.4%

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Once again the volatility of GDPNow vs Nowcast is in play. The former surged on the retail sales report.

GDPNow has had a hot hand in accuracy vs Nowcast for at least two consecutive quarters. Its estimate of fourth-quarter GDP jumped to 3.0% with real final sales, the true bottom line estimate of GDP at 3.3%.

The retail sales numbers were interesting.

Yesterday, I asked Core Group Retail Sales Jump 0.9% in Nov vs 0.2% Overall: Hurricane Distortions?

Retail sales only increased by 0.2% in Nov. but control group sales which exclude gas and autos jumped 0.9%. It’s the control group that feeds many GDP estimates but I do not know if that is true for GDPNow.

Control Group Exclusions

Exclusion Synopsis

  1. If you exclude 44% of retail sales, then retail sales rose by 0.9%
  2. Otherwise, retail sales rose by 0.2%
  3. The former drives many GDP estimates.

Hurricane Distortions?

Florence was a killer. But people had plenty of advance notice coupled with lots of fear of what happened to others who did not flee recent hurricanes.

Florence Q&A

  • What did people do? They drove away, saving their cars.
  • What was ruined? Stuff left behind, especially appliances, electronics, and furniture,

Retail Sales Spotlight​​

  • Gasoline sales fell 1.2% That’s easy to explain: The price of crude plunged.
  • Furniture sales rose 1.2%. Really? With existing and home sales falling? Why?
  • Electronic and appliances rose 1.4%. Really? With existing and home sales falling? Why?
  • Nonstore retailers (think Amazon) rose 2.3% but this is part of an overall trend. It may also have been exacerbated by hurricane item replacements.
  • The only strange item in this group is health and person care sales which rose 0.9%, but that is one of the smaller breakdown components.

Hurricane distortions or not, it seems pretty silly to exclude 44% of retail sales while bragging about retail sales.

Mike “Mish” Shedlock

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December 15th, 2018

Posted In: Mish Talk

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