re: Q2 GDP, annualized, quarter over quarter -32.9%

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I think it was likely more related to the employment numbers sucking wind.

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Not to mention the shorter the time frame, the less rational and efficient a market is, particularly when we’re talking about intraday movements. In addition, I don’t think the market has been very rational and/or efficient during the past few months because understandably we’re all working with way more uncertainty than usual, particularly moving forward.

In addition and somewhat related to the jobs report were 2 sub components that had positive contributions that are not particularly positive overall and/or may not have that contribution going forward given the potential policy changes.

Specifically, the two sub components that has a positive contribution were net exports of goods and services (+0.68%) and government consumption expenditures and investments, specifically at the federal level (+1.23%).

The net exports data point is not particularly positive because it was a result of contracting trade both ways, just a large contraction in exports. There is a pretty strong correlation (I think like 0.7 or so) between the change in the trade deficit (negative net) and change in GDP. In other words, when the trade deficit increases, GDP increases. In this case, it decreased, and it has been for the last 4 quarters, even before the pandemic.

In addition, with the new jobless claims continuing to be very high, this likely means that there are both more jobs and business that are permanently lost and trade both ways may continue to contract, and the deficit may shrink even more, but that’s not a good sign.

In addition, unless they’re categorized elsewhere, I suspect the UI insurance expansion and the stimulus checks likely contributed to the federal expenditures having a larger and more positive contribution. But if those are less moving forward (whether they should or shouldn’t be) then this won’t have as positive of a contribution moving forward.

Finally, the nominal change in GDP actually had a larger decrease than real GDP, about 1.4% lower on an annualized basis. That means that there was deflation in this quarter and deflation is obviously bad for the economy. So if that continues, this would be a bad sign, but even if it doesn’t, and we start to see some modest inflation again, while this would probably be a good sign, the subsequent real GDP estimates will be offset by that. So the top line growth estimates may not be as positive as they indicate, even if that’s a positive sign overall.