Consumer Metrics Institute Previews 3rd Quarter GDP

Long time EPJ readers know I have featured in the past the work of Richard Davis at Consumer Metrics Institute. His real time analytical work is among the best for attempting to track that massive aggregate, "the economy". He is starting to build quite a track record in being roughly 125 plus days ahead of BEA measurements. In an email today, Richard writes to me:

On May 27th the BEA released its first revision to its 1st Quarter 2010 GDP growth rate measurement, lowering the number from a 3.2% annualized growth rate to 3.0% annualized growth. One day later the Consumer Metrics Institute's 'Daily Growth Index' was signalling what we should expect the BEA's measurement of the 3rd Quarter 2010 GDP growth rate to be: contracting at about a 2.0% rate.

The ...BEA estimate of 1st Quarter 2010 GDP growth trailed our 'Daily Growth Index' by 127 days... The 3rd Quarter of 2010 ends 125 days after May 28th, [at 5-28] our 'Daily Growth Index' was recording a 'growth' rate of -1.99%. If the BEA estimates continue to trail our 'Daily Growth Index' in a consistent manner we should expect that the 3rd Quarter's GDP 'growth' rate will be in the -2.0% neighborhood.

Several things were interesting about the BEA announcement, which seems to have been largely ignored by the equity markets on a day when the Dow Industrials were up over 280 points. Not only was the total growth rate revised downward by .2%, but the impact of inventory building was adjusted upward from 1.57% to 1.64%, meaning that the end growth rate of consumer demand (net of inventory build-ups) was dropped from about 1.63% to something closer to 1.36% -- a 17% reduction that was hardly worthy of a 280 point rally in the markets.