They sure didn’t like that Trade Deficit number or the Fed’s statement yesterday, once they got around to parsing it overnight.
Let’s talk trade deficit for a second, because it was simply so awful that almost no one in the mainstream was ready for it. The implications of this number will work their way into GDP calculations and recalculations and the end result will not be pretty.
The trade deficit widened a surprising 18.8 percent in June on a surge of consumer goods from China and other suppliers, suggesting second-quarter economic growth was much weaker than previously thought.
The monthly trade gap totaled $49.9 billion, the highest since October 2008, the Commerce Department reported on Wednesday, as U.S. exports stumbled a bit.
The deficit was wider than any of the 67 Wall Street forecasts collected before the report, and is likely to prompt analysts to ratchet down estimates of second-quarter gross domestic product growth.
Great. So now what?
Well, now they’ll be revising Q1 GDP drastically lower and chopping Q2 GDP down to a nub.
Here’s Tyler Durden:
And courtesy of the Current Account equation, what this surge in deficits means is that Q1 GDP will now likely be revised to well under 1.0%! As JPM reported earlier, revision in BEA assumptions on wholesale and non-durable inventory alone will push Q1 GDP from the official 2.4% to 1.3%. Today’s data is the last nail in the Q2 GDP number, and according to analysts will take out another 0.4% from the GDP, meaning that when all is said and done, Q2 GDP will come out to sub-1%.
White House spin aside, it’s not just that things are bad, it’s that they’ve been getting worse than what the official numbers have been telling us.