SHADOWSTATS BULLET EDITION NUMBER FIVE · Best Wishes — John Williams (707) 763-5786,...

Copyright 2019 Shadow Government Statistics, Walter J. Williams, www.shadowstats.com 1

SHADOWSTATS BULLET EDITION NUMBER FIVE

March 30, 2019

____________

Reporting-Quality Issues Mount With Shutdown Catch-Up Data

Fourth-Quarter 2018 GDP Growth Slowed Sharply, With

Further Downside Adjustments Pending in July 26th Benchmarking

Industrial Production Benchmark Revision Patterns Suggested

Still-Slower Fourth-Quarter and Near-Contraction First-Quarter Activity

Contracting First- and Second-Quarter 2019 GDP Activity Likely Follows

Housing Sector Remains In Deep Recession,

Despite Government-Shutdown Disrupted Headline Numbers

U.S. Economy Continues to Weaken More Sharply and Quickly

Than Widely Acknowledged, Signaling a Formal Recession Triggered by

Overly Aggressive FOMC Tightening and Rate Hikes of the Last Year or So

____________

Shadow Government Statistics — Bullet Edition No. 5 — March 30, 2019


____________

ShadowStats Commentaries, Bullet Editions, Watches and Daily Updates:

The Daily Update posts regularly on the ShadowStats home page (www.ShadowStats.com), covering major economic releases as published by the issuing authorities, usually within two-to-

three hours of headline publication. Unusual market circumstances, as well as the pending

ShadowStats publishing schedule also are reviewed there.

The Bullet Edition is published several times per month, as dictated by economic reporting, and underlying or unusual economic and financial-market developments. Simply put, the Bullet

Edition conveys brief communications and analyses on limited topics of particular near-term

significance.

o Today’s Bullet Edition reviews a large number of shutdown delayed, catch up economic releases of the last week, including February Housing Starts and New- and Existing-Home

Sales, the “Final” Estimate of Fourth-Quarter 2018 GDP, the January Trade Deficit, and

the March 27, 2019 Industrial Production Benchmark Revisions.

The more-comprehensive Regular Commentary should publish about once per month, providing a regular and broader overview of unfolding conditions and likely developments, occasionally in

the context of a Special Commentary.

o Pending Special Commentary No. 983-B, The Annual Review should post April 1st.

Hyperinflation and Consumer Liquidity Watches will update once per month, with alternating updates roughly every other week, resuming in April.

The ShadowStats general outlook has not changed, specifically including a deepening U.S. economic

downturn, mounting downside pressures on the U.S. dollar and stock market, and upside pressures

on gold and silver prices in the weeks and months ahead.

Your comments and suggestions always are invited.

Best Wishes — John Williams (707) 763-5786, [email protected]

_______________

http://www.shadowstats.com/mailto:[email protected]



____________________

Contents – Bullet Edition No. 5

Reporting-Quality Issues Intensify Along With Catch Up in Shutdown-Delayed Numbers 5

Headline GDP Growth Slowed Sharply, Contraction Looms 5

Some Bumps and Bruises to Housing and Construction 5

Trade Deficit Does Some Unusual Gyrating 5

Industrial Production Benchmarking Indicated Some Negative GDP Pressures 5

Alternate Recession Cycle — 2018 Recession Is Underway 5

Table 1: Gross Domestic Product (GDP), Annual Detail (2015 to 2018) ............................................................................. 7

Graph 1: Annual Real GDP (1929 to “Final” 2018) ........................................................................................................... 8

Graph 2: Real Annual Real GDP Percent Change (1930 to “Final” 2018) .......................................................................... 8

Table 2: Gross Domestic Product (GDP), Quarterly Detail by Major Sector to “Final” Fourth-Quarter 2018..................... 9

Graph 3: Real GDP (1947 to “Final” Fourth-Quarter 2018) ............................................................................................ 10

Graph 4: Real GDP, Year-to-Year % Change (1948 to “Final” Headline Fourth-Quarter 2018) ....................................... 10

Graph 5: Real GDP (2000 to “Final” Fourth-Quarter 2018) ............................................................................................ 11

Graph 6: Real GDP, Year-to-Year % Change (2000 to “Final” Headline Fourth-Quarter 2018) ....................................... 11

Graph 7: Real Gross Domestic Private Residential Investment to “Final” Fourth-Quarter 2018 GDP .............................. 12

Graph 8: Real Gross Domestic Residential Investment (Year-to-Year) ............................................................................... 12

Graph 9: Real Net Exports of Goods and Services in GDP (1q1994 to “Final” Fourth-Quarter 2018)............................... 13

Graph 10: Real U.S. Merchandise Trade Deficit (First-Quarter 1994 to Latest Fourth-Quarter 2018) ............................... 13

Underlying Economic Reality – Alternate Real GDP Using Corrected Inflation 15

Graph 11: Corrected-Inflation Based GDP (1970 to “Final” Fourth-Quarter 2018) ......................................................... 15

Graph 12: Corrected-Inflation Based GDP, Yr-to-Yr % Change (1970 to “Final” Fourth-Quarter 2018) .......................... 15

Graph 13: Corrected-Inflation Based GDP (2000 to “Final” Fourth-Quarter 2018) ......................................................... 16

Graph 14: Corrected-Inflation Based GDP, Yr-to-Yr % Change (2000 to “Final” Fourth-Quarter 2018) .......................... 16

The Housing and Construction Sector 17

Graph 15: Existing-Home Sales, National Association of Realtors, Monthly Rate (2000 to Date) ....................................... 18

Graph 16: Existing-Home Sales, Six-Month Moving Average (2000 to Date) ..................................................................... 18

Graph 17: New-Home Sales, Monthly Rate (2000 to Date) ................................................................................................ 19

Graph 18: New-Home Sales, Six-Month Moving Average (2000 to Date) ........................................................................... 19



Graph 19: Building Permits, Annual Rate by Month (2000 to Date)................................................................................... 20

Graph 20: Building Permits, Six-Month Moving Average (2000 to Date) ........................................................................... 20

Graph 21: Housing Starts, Annual Rate by Month (2000 to Date) ...................................................................................... 21

Graph 22: Housing Starts, Six-Month Moving Average (2000 to Date) .............................................................................. 21

Graph 23: Single- and Multiple-Unit, Monthly Rate (2000 to Date) ................................................................................... 22

Graph 24: Single- and Multiple-Unit, Six-Month Moving Average (2000 to Date).............................................................. 22

Graph 25: Housing Starts, Annual Rate by Month (1946 to Date) ...................................................................................... 23

Graph 26: Housing Starts, Annual Rate, Six-Month Moving Average (1946 to Date) ......................................................... 23

Industrial Production Annual Benchmark Revisions 24

Graph 27: Benchmark Revised Capacity Utilization (2000 to Date) ................................................................................... 24

Graph 28: Benchmark Revised Industrial Production (2000 to Date)................................................................................. 25

Graph 29: Benchmark Revised Manufacturing, 75.0% of 2018 Industrial Production (2000-to-Date) ................................ 25

Graph 30: Benchmark Revised Mining, 14.6% of 2018 Industrial Production (2000-to-Date) ............................................ 26

Graph 31: Benchmark Revised Utilities, 10.4% of 2018 Industrial Production (2000 to Date) ........................................... 26

____________________



Reporting-Quality Issues Intensify Along With Catch Up in Shutdown-Delayed Numbers

Headline GDP Growth Slowed Sharply, Contraction Looms

Some Bumps and Bruises to Housing and Construction

Trade Deficit Does Some Unusual Gyrating

Industrial Production Benchmarking Indicated Some Negative GDP Pressures

Alternate Recession Cycle — 2018 Recession Is Underway

Shutdown-Disrupted Government Economic Reports Largely Will Be ―Caught Up‖ in April, With

Reporting Detail Beginning to Approach Standard Quality by the End of May. The late-December

to late-January government shutdown shuttered most of the economic surveying and reporting by the

Commerce Department. That considered, the Census Bureau (Census) and Bureau of Economic Analysis

(BEA) have done a remarkable job getting regular surveying caught up and back online. Nonetheless,

disruptions to surveying conditions and reporting distortions were and to be expected and have been noted

in the reporting of some of the related data, with unusual volatility and patterns of activity seen in detail

ranging from retail sales and housing and construction to the trade balance and GDP.

Headline reporting should be close to caught up, with the April 17th release of the February Trade Deficit,

but consistent and standard-quality data reporting likely will not be back in place until mid-year, with the

annual GDP benchmarking on July 26th, and subsequent, subsidiary series benchmarkings into early 2020

eventually moving headline details in line with something approximating underlying reality.

Where the Bureau of Labor Statistics (BLS) was not shuttered, reporting of the regular labor-market and

headline inflation details continued, although labor-market conditions and reporting still were disrupted

by the large number of government workers furloughed or working without pay, and acknowledged

inconsistent reporting of same. The Federal Reserve Board (FRB) was independent of the shutdown, but

even some of their data were affected, such as Industrial Production, where part of the FRB surveying

relies on some Census Bureau detail.

Today’s Bullet Edition covers a spate of catch up reporting in the last week tied to housing and

construction, the trade deficit and a far-from “Final” or complete reporting of fourth-quarter GDP, plus

the Federal Reserve Board’s Annual Benchmark Revisions to Industrial Production.



Coverage here begins with the broadest measure, the headline GDP, which expands naturally into the

Trade Deficit and to the Housing and Construction numbers. Beyond other ShadowStats assessments,

headline GDP also faces likely weakness in pending revision and in near-term reporting, based on the

just-released Industrial Production Benchmarking.

New Recession Begins to Unfold. Elements of the discussion here are expanded in Special Commentary

No. 983-B, which will be published in the next couple of days. U.S. economic activity has slowed sharply

and now appears to be contracting. The broad economy likely has entered recession, reflected in the

sharp (and still under-reported) slowing of activity in fourth-quarter 2018 GDP, with outright back-to-

back quarterly contractions likely in both first- and second-quarter 2019. The excessive rate hikes and

tightening liquidity of the last year or so by the Federal Reserve’s Federal Open Market Committee

(FOMC) were the proximal trigger of the current downturn. Impaired consumer liquidity has pummeled

areas ranging from Retail Sales to the Housing market. The Underlying Economic Reality section

(Graphs 11 to 14) showing the Alternate Real GDP, will be discussed and reviewed fully in No. 983-B.

―Final‖ Fourth-Quarter 2018 GDP Slowed to a Near-Consensus 2.17% (Previously 2.59%), down

from a Third-Quarter 3.36%, with GDI slowing to 1.66% from 4.56%, GNP to 2.12% from 3.05%.

Well shy of having its normal complement or quality of underlying data, what was set as an “Initial”

(combined first and second) estimate of Fourth-Quarter 2018 Gross Domestic Product (GDP) on February

28th, was revised and released as a “Final” estimate on March 28th, by the Bureau of Economic Analysis

(BEA). Neither the initial nor the final guesstimate was based on the regular quality or as well-seasoned

detail, as usually would be the case, due to recent data disruptions from the partial shutdown of the U.S.

government. Accordingly, the regularly scheduled annual GDP benchmark revisions of July 26th not

only are likely to see some sharp downside revisions to the current headline fourth-quarter GDP detail

and related series, but also headline quarterly contractions in both first- and second-quarter 2019 GDP.

Released along with the final fourth-quarter GDP were the “Final” (combined initial and final) estimates

of Fourth-Quarter 2018 Gross Domestic Income (GDI), which is the theoretical income-side “equivalent”

to the consumption-side GDP, and the Gross National Product (GNP), which is the broadest economic

measure, reflecting the GDP plus the trade balance in factor income (interest and dividends).

Targeting the Consensus Outlook? The downside “final” revision of real fourth-quarter GDP to 2.17%,

from an “initial” (a roughly combined first and second) estimate of 2.59% (2.6% initial old Consensus),

was in line with market expectations (2.2% latest Consensus), slowing from 3.36% in third-quarter 2018.

Fourth-quarter 2018 annual growth revised to 2.97% (previously 3.08%) versus 3.00% in third-quarter

2018. Where the BEA knew it was working with raw data of less-than-usual quality, it would not be

unusual for the Bureau to target the Consensus outlook for its headline reporting. Some years back I was

advised by the BEA that they viewed the consensus outlook as good indicator of underlying activity.

The coincident “Initial and Final” estimates of fourth-quarter 2018 GDI and GNP also slowed sharply

versus third-quarter activity. Annualized fourth-quarter GDI growth slowed to 1.66%, from 4.56% in the

third-quarter, with annual growth at 2.74% versus 2.69%. Fourth-quarter GNP slowed to an annualized

2.12%, from 3.05% in the third-quarter, with annual growth slowing to 2.85% versus 2.96%. Extended

details follow with Table I and Table II, along with the usual, related Graphs 1 to 14.



Please note the intensifying negative impact on the headline GDP growth from deteriorating Residential

Investment (see Table II and Graphs 7 and 8), with follow-up detail in the Housing and Construction

Sector (page 17). Discussion as to the headline March 27th release of the January 2019 Merchandise

Trade Deficit accompanies Graphs 9 and 10 on page 13.

Table 1: Gross Domestic Product (GDP), Annual Detail (2015 to 2018)

GDP 2015 2016 2017 2018

COMPONENTS

CONTRIBUTING ECONOMIC SECTOR

Personal Consumption Expenditures

- Goods 1.02% 0.77% 0.78% 0.78%

-- Motor Vehicles 0.18% 0.08% 0.11% 0.06%

- Services 1.48% 1.09% 0.95% 1.01%

Gross Private Domestic Investment

- Fixed Investment 0.57% 0.29% 0.81% 0.90%

-- Residential 0.33% 0.23% 0.13% -0.01%

- Change in Private Inventories 0.25% -0.53% 0.00% 0.12%

Net Exports of Goods and Services -0.78% -0.30% -0.31% -0.21%

Government Consumption/Investment 0.33% 0.25% -0.01% 0.26%

GDP ANNUAL REAL GROWTH 2.88% 1.57% 2.22% 2.86%

Final Sales, GDP Less Inventories 2.63% 2.10% 2.22% 2.74%

CONTRIBUTING PRODUCT SECTOR

Goods 0.88% 0.35% 1.11% 1.49%

Services 1.71% 1.13% 0.92% 1.20%

Structures 0.29% 0.08% 0.19% 0.17%

GDP Annual Real Growth 2.88% 1.57% 2.22% 2.86%

Gross Domestic Product (GDP) 2.88% 1.57% 2.22% 2.86%

Gross Domestic Income (GDI) 2.57% 0.85% 2.27% 2.64%

Gross National Product (GNP) 2.76% 1.47% 2.33% 2.91%

ShadowStats Corrected-Inflation GDP* 0.80% -0.49% 0.15% 0.78%

Implicit Price Deflator (IPD) Inflation 1.07% 1.09% 1.90% 2.25%

Sources: Bureau of Economic Analysis (BEA), www.ShadowStats.com (ShadowStats).

*Real GDP corrected for understated inflation (see Special Commentary No. 968-Extended)

See Graphs 11 to 14 with standard headline GDP reflected in Graphs 1 to 10 .

Full Year Annual Real GDP Growth (2015 to 2018)

Final Estimate of Full-Year 2018 GDP and Earlier Headline Data

Annual Growth Contribution by Consumption and Product Sector

SUPPLEMENTAL

Annual Real GDP Change and Headline Implicit Price Deflator Inflation



Graph 1: Annual Real GDP (1929 to “Final” 2018)

Graph 2: Real Annual Real GDP Percent Change (1930 to “Final” 2018)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

19

29

19

34

19

39

19

44

19

49

19

54

19

59

19

64

19

69

19

74

19

79

19

84

19

89

19

94

19

99

20

04

20

09

20

14

20

19

Bil

lio

ns o

f 2012 D

oll

ars

Annual Real Gross Domestic Product

Level in Billions of 2012 Dollars, 1929 to 2018 [ShadowStats, BEA]

-15%

-10%

-5%

0%

5%

10%

15%

20%

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

Year-

to-Y

ear

Perc

en

t C

han

ge

Annual Real Gross Domestic Product (GDP)DP Percent Change, 1930 to 2018 [ShadowStats, BEA]



Table 2: Gross Domestic Product (GDP), Quarterly Detail by Major Sector to “Final” Fourth-Quarter 2018

4th-Q 1st-Q 2nd-Q 3rd-Q 4th-Q 4th-Q

GDP 2017 2018 2018 2018 2018 2018

COMPONENTS Final Final Final Final "Initial" "Final"

Estimate Estimate

CONTRIBUTING ECONOMIC SECTOR

Personal Consumption Expenditures

- Goods 1.42% -0.13% 1.16% 0.90% 0.80% 0.54%

-- Motor Vehicles 0.40% -0.35% 0.16% -0.05% 0.22% 0.20%

- Services 1.22% 0.49% 1.42% 1.47% 1.11% 1.12%

Gross Private Domestic Investment

- Fixed Investment 1.04% 1.34% 1.10% 0.21% 0.69% 0.54%

-- Residential 0.41% -0.14% -0.05% -0.14% -0.14% -0.18%

- Change in Private Inventories -0.91% 0.27% -1.17% 2.33% 0.13% 0.11%

Net Exports of Goods and Services -0.89% -0.02% 1.22% -1.99% -0.22% -0.08%

Government Consumption/Investment 0.41% 0.27% 0.43% 0.44% 0.07% -0.07%

GDP ANNUALIZED REAL GROWTH 2.29% 2.22% 4.16% 3.36% 2.59% 2.17%

Final Sales, GDP Less Inventories 3.20% 1.95% 5.33% 1.03% 2.46% 2.06%

CONTRIBUTING PRODUCT SECTOR

Goods 0.34% 1.20% 1.91% 1.76% 1.93% 1.66%

Services 1.32% 0.73% 1.78% 1.77% 1.01% 0.99%

Structures 0.64% 0.28% 0.47% -0.17% -0.35% -0.48%

GDP Annualized Real Growth 2.29% 2.22% 4.16% 3.36% 2.59% 2.17%

Gross Domestic Product (GDP) 2.29% 2.22% 4.16% 3.36% 2.59% 2.17%

Gross Domestic Income (GDI) 1.49% 3.90% 0.87% 4.56% -- 1.66%

Gross National Product (GNP) 2.57% 2.20% 4.04% 3.05% -- 2.12%

ShadowStats Corrected-Inflation GDP* 0.22% 0.15% 2.05% 1.27% 0.51% 0.10%

Implicit Price Deflator (IPD) Inflation 2.72% 2.02% 3.31% 1.51% 1.95% 1.86%

Gross Domestic Product (GDP) 2.47% 2.58% 2.87% 3.00% 3.08% 2.97%

Gross Domestic Income (GDI) 2.25% 2.36% 1.88% 2.69% -- 2.74%

Gross National Product (GNP) 2.56% 2.73% 3.09% 2.96% -- 2.85%

ShadowStats Corrected-Inflation GDP* 0.40% 0.51% 0.79% 0.92% 0.99% 0.89%

Implicit Price Deflator (IPD) Inflation 1.97% 1.95% 2.50% 2.39% 2.20% 2.17%

Sources: Bureau of Economic Analysis (BEA), www.ShadowStats.com (ShadowStats).

*Real GDP corrected for understated headline inflation (see Special Commentary No. 968-Extended , and

Graphs 11 to 14 here). Standard headline GDP is reflected in Graphs 1 to 10.

Annualized Quarterly Real Growth in Headline Gross Domestic Product

Final Estimate of Fourth-Quarter 2018 GDP and Earlier Headline Data

Growth Contribution by Consumption and Product Sector

SUPPLEMENTAL

Annualized Quarter-to-Quarter Real GDP Change and Headline Implicit Price Deflator Inflation

Year-to-Year Real GDP Change and Headline Implicit Price Deflator Inflation



Graph 3: Real GDP (1947 to “Final” Fourth-Quarter 2018)

Graph 4: Real GDP, Year-to-Year % Change (1948 to “Final” Fourth-Quarter 2018)

0

10

20

30

40

50

60

70

80

90

10 0

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Billio

ns o

f 2012 D

ollars

Real Gross Domestic Product Quarterly in Billions of 2012 Dollars

1947 to "Final" 4q2018, Seasonally-Adjusted [ShadowStats, BEA]

0

10

20

30

40

50

60

70

80

90

10 0

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Year-

to-Y

ear

Perc

en

t C

han

ge

Real Gross Domestic Product Year-to-Year Percent Change by Quarter




Graph 5: Real GDP (2000 to “Final” Fourth-Quarter 2018)

Graph 6: Real GDP, Year-to-Year % Change (2000 to “Final” Fourth-Quarter 2018)

0

10

20

30

40

50

60

70

80

90

10 0

12,000

13,000

14,000

15,000

16,000

17,000

18,000

19,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Billio

ns o

f 2012 D

ollars

Real Gross Domestic Product Quarterly in Billions of 2012 Dollars


0

10

20

30

40

50

60

70

80

90

10 0

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Year-

to-Y

ear

Perc

en

t C

han

ge

Quarterly Real Gross Domestic Product Year-to-Year Change, 1q2000 to "Final" 4q2018 [ShadowStats, BEA]



Also See Graphs 15 to 26 in the Housing and Construction Section

Graph 7: Real Gross Domestic Private Residential Investment to “Final” Fourth-Quarter 2018 GDP

Graph 8: Real Gross Domestic Residential Investment (Year-to-Year)

0

10

20

30

40

50

60

70

80

90

10 0

0

100

200

300

400

500

600

700

800

900

1000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Billio

ns o

f C

hain

ed

2012 D

ollars

GDP Gross Private Domestic Investment - Residential Billions of Chained 2012 Dollars

To "Final" Fourth-Quarter 2018, Seasonally-Adjusted [ShadowStats, BEA]

0

10

20

30

40

50

60

70

80

90

10 0

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Year-

to-Y

ear

Perc

en

t C

han

ge

GDP Gross Private Domestic Investment - Residential Real Year-to-Year Change, 1q2003 to "Final" 4q2018 [ShadowStats, BEA]



Graph 9: Real Net Exports of Goods and Services in GDP (1q1994 to “Final” Fourth-Quarter 2018)

Graph 10: Real U.S. Merchandise Trade Deficit (First-Quarter 1994 to Latest Fourth-Quarter 2018)

0

10

20

30

40

50

60

70

80

90

10 0

-1,100

-1,000

-900

-800

-700

-600

-500

-400

-300

-200

-100

01

99

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

Billio

ns o

f C

hain

ed

2012 D

ollars

U.S. Net Exports of Goods and Services (GDP Accounting)

Quarterly Deficit at Annual Rate (1q1994 to "Final" 4q2018) Seasonally-Adjusted [ShadowStats, BEA]

0

10

20

30

40

50

60

70

80

90

10 0

-1,200

-1,100

-1,000

-900

-800

-700

-600

-500

-400

-300

-200

-100

0

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

Billio

ns o

f C

hain

ed

2012 D

ollars

Real U.S. Merchandise Trade Deficit (Census Basis) Quarterly Deficit at Annual Rate, 1994 to 4q2018

Seasonally-Adjusted [ShadowStats, Census]



January 2019 Trade Deficit Narrowed Sharply in a Third Consecutive Wild Monthly Swing.

Against a minimally revised deepening, in the sharply deteriorating Fourth-Quarter 2018 Real

Merchandise Trade Deficit (see preceding Graphs 9 and 10), the January 2019 Trade Deficit narrowed

sharply, in continuing wild monthly swings, reported by Census and the BEA on March 27th. A sharp

decline in imports, and a small increase in exports, narrowed the nominal January trade deficit to $51.1

billion, from a revised, deepened $59.9 billion in December, versus $50.5 billion in November and $56.5

billion in October. The fourth-quarter trade shortfall remained the worst in U.S. history, and a factor in

the slowing of fourth-quarter GDP growth. January’s narrowed deficit is a relative positive for first-

quarter 2019 economic activity, but one could expect the February data to swing back sharply to a deeper

deficit, closer to the norm (note the October-November-December pattern above). Not discussed by the

Census Bureau/Bureau of Economic Analysis, data-flow disruptions from the government shutdown

likely are factor in this unusual, recent increase in reporting volatility. Census/BEA still are one month

behind in their key, monthly trade reporting.

[Underlying Economic Reality – Alternate GDP Using Corrected Inflation begins on the next page.]



Underlying Economic Reality – Alternate Real GDP Using Corrected Inflation The plots in Graphs 11 to 14 reflect GDP deflated by the Implicit Price Deflator corrected for understated annual

inflation. Full detail and review follow in No. 983-B; background available at Special Commentary No. 968-Extended.

Graph 11: Corrected-Inflation Based GDP (1970 to “Final” Fourth-Quarter 2018)

Graph 12: Corrected-Inflation Based GDP, Yr-to-Yr % Change (1970 to “Final” Fourth-Quarter 2018)

0

10

20

30

40

50

60

70

80

90

10 0

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Billio

ns o

f "C

orr

ecte

d" 2

012 D

ollars

Corrected Real Gross Domestic Product Nominal GDP Deflated by Implicit Price Deflator Adjusted for

Understatement of Annual Inflation To "Final" 4q2018, Seasonally-Adjusted [ShadowStats, BEA]

Formal Recession

ShadowStats Recession

Corrected GDP

0

10

20

30

40

50

60

70

80

90

10 0

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Year-

to-Y

ear

Perc

en

t C

han

ge

Corrected Real Gross Domestic Product Adjusted for Understatement of Annual Inflation

Year-to-Year Percent Change To "Final" 4q2018, Seasonally-Adjusted [ShadowStats, BEA]

Formal Recession

ShadowStats Recession

Corrected GDP

http://www.shadowstats.com/article/c968b



Graph 13: Corrected-Inflation Based GDP (2000 to “Final” Fourth-Quarter 2018)

Graph 14: Corrected-Inflation Based GDP, Yr-to-Yr % Change (2000 to “Final” Fourth-Quarter 2018)

0

10

20

30

40

50

60

70

80

90

10 0

96

97

98

99

100

101

102

103

104

105

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Ind

ex L

ev

el, 1

q2000 =

100

Corrected-Inflation Real Gross Domestic Product Nominal GDP Deflated by Implicit Price Deflator Corrected for

Roughly Two-Percentage Point Understatement of Annual Inflation To "Final" 4q2018, Seasonally-Adjusted [ShadowStats, BEA]

0

10

20

30

40

50

60

70

80

90

10 0

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Year-

to-Y

ear

Ch

an

ge

Corrected Gross Domestic Product, Yr-to-Yr Percent Change 2000 to "Final" 4q2018, Seasonally-Adjusted [ShadowStats, BEA]



The Housing and Construction Sector

Home Sales and New Residential Construction Continued in Recession, Despite Some Recent

Volatility and Mixed Reporting. February 2019 Existing-Home Sales Growth Jumped 11.8% in the

month, but declined 1.8% (-1.8%) year-to-year, as reported by the National Association of Realtors on

March 22nd (see details and press release at www.nar.realtor under research/housing statistics). Reflected

in Graphs 15 and 16, following a string of sharp declines, and on top of a small downside revision to

January activity, February New-Home Sales rebounded by 11.8%, the strongest monthly gain in more

than three years. That said, monthly sales were down year-to-year by 1.8% (-1.8%). The series continued

in a deepening year-to-year contraction in the trailing twelve-month moving average of the series, where

February 2019, dropped to a new low of 4.2% (-4.2%), its tenth consecutive and continuously deepening

annual rate of decline. February 2019 sales activity remained 24.2% (-24.2%) shy of every recovering its

pre-recession high.

February and Revised January 2019 New-Home Sales Surged in the Month, Amidst Absurdly Negative

Revisions. The government-shutdown delayed/disrupted March 29th New-Home Sales reporting out of

the Census Bureau, showed statistically insignificant, February 2019 respective monthly and annual gains

of 4.9% and 0.6%, on top of sharp upside revisions to January 2019 activity (see Graphs 17 and 18). Yet,

those numbers followed extraordinarily sharp downside revisions to fourth-quarter 2018 activity.

What had been a fourth-quarter 2018 annualized gain of 3.6% revised to an annualized contraction of

13.4% (-13.4%). What had been an early negative trend for first-quarter 2019 New-Home Sales turned

positive. Consistent with other housing and construction series, New-Home Sales remains in an ongoing

housing recession, holding shy by 52.0% (-52.0%) of ever recovering its pre-recession peak

February 2019 Housing Starts Destabilized by Government Shutdown Data Disruptions, Continued in

Deepening Annual Decline and Downtrend. The broad picture for February Housing Starts and

Building Permits remained highly negative, but of unusually poor quality for initial monthly reporting of

this highly unstable and shutdown-delayed series (see Graphs 19 to 26). Reported March 26th by the

Census Bureau, both Starts and Permits saw monthly and annual contractions, in deepening long-term

downtrends. That said, the previously reported level of Starts revised higher. Accompanying what

standardly would be nonsensical volatility in the headline Housing Starts, the Commerce Department

warned of government-shutdown delayed data collection and processing, which “... caused the

adjustments for anticipated late reported December starts and completions to be less accurate than normal,

resulting in larger than normal revisions.”

That said, headline February 2019 month-to-month Housing Starts declined 8.7% (-8.7%), following a

revised January gain of 11.7% [previously 18.6%] and a revised December decline of 5.5% (-5.5%)

[previously 14.0% (-14.0%)]. More telling, year-to-year February 2019 Starts declined 9.9% (-9.9%),

following revised annual declines of 4.6% (-4.6%) [previously 7.8% (-7.8%)] in January 2019, and 5.8%

(-5.8%) [previously 14.3% (-14.3%) in December 2018.

Where the aggregate February Starts dropped 8.7% (-8.7%) in the month, that reflected a plunge of 17.0%

(-17.0%) in Single Units and a 23.5% surge in Multiple Units. The aggregate annual decline of 9.9%

(-9.9%) was composed of drops of 10.6% (-10.6%) in Single Units and 5.4% (-5.4%) in Multiple Units of



5 Units or More. As usual, none of those monthly or annual changes was deemed statistically meaningful

by Census, except for the 17.0% (-17.0%) monthly plunge in Single Units. (Continues on page 20 ...)

Graph 15: Existing-Home Sales, National Association of Realtors, Monthly Rate (2000 to Date)

Graph 16: Existing-Home Sales, Six-Month Moving Average (2000 to Date)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

275

325

375

425

475

525

575

625

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Th

ou

san

ds o

f U

nit

s p

er

Mo

nth

Existing-Home Sales (Monthly Rate) Single- and Multiple-Unit Sales, Non-Annualized Monthly Level

To February 2019, Seasonally-Adjusted [ShadowStats, NAR, HUD]

Original Series

NAR-Corrected Series

Average Mar '09 to Dec '11

The Mar '09 to Dec '11 average

smooths out monthly volatility tied to tax-break and homebuyer-incentive periods.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

275

325

375

425

475

525

575

625

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Th

ou

san

ds o

f U

nit

s p

er

Mo

nth

Existing-Home Sales (Six-Month Moving Average) Single- and Multiple-Unit Sales, Non-Annualized Monthly Rate

To February 2019, Seasonally-Adjusted [ShadowStats, NAR, HUD]



Graph 17: New-Home Sales, Monthly Rate (2000 to Date)

Graph 18: New-Home Sales, Six-Month Moving Average (2000 to Date)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

0

10

20

30

40

50

60

70

80

90

100

110

120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Th

ou

san

ds o

f U

nit

s

New-Home Sales (Monthly Rate) To February 2019, Seasonally-Adjusted [ShadowStats, Census and HUD]

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

0

10

20

30

40

50

60

70

80

90

100

110

120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Th

ou

san

ds o

f U

nit

s

New-Home Sales (Six-Month Moving Average) To February 2019, Seasonally-Adjusted [ShadowStats, Census and HUD]



Graph 19: Building Permits, Annual Rate by Month (2000 to Date)

Graph 20: Building Permits, Six-Month Moving Average (2000 to Date)

(... Continued from page 18 ) More-stable February 2019 Building Permits showed statistically

significant, monthly and annual declines of 1.6% (-1.6%) and 2.0% (-2.0%), with January Permits down

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Millio

ns o

f U

nit

s

Building Permits for Housing Units (Annual Rate by Month) To February 2019, Seasonally-Adjusted [ShadowStats, Census and HUD]

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

An

nu

al

Rate

in

Millio

ns o

f U

nit

s

Building Permits for Housing Units (Six-Month Moving Average) To February 2019 Seasonally-Adjusted [ShadowStats, Census and HUD]



month-to-month by a revised 0.7% (-0.7%) [previously up by 1.4%], down year-to-year by 3.6% (-3.6%)

[previously 1.5% (-1.5%)]. February 2019 Housing Starts remained shy by 48.9% (-48.9%) and Building

Permits shy by 42.7% (-42.7%) of ever recovering their levels of pre-recession peak activity.

Graph 21: Housing Starts, Annual Rate by Month (2000 to Date)

Graph 22: Housing Starts, Six-Month Moving Average (2000 to Date)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Millio

ns o

f U

nit

s

Housing Starts (Annual Rate by Month) To February 2019, Seasonally-Adjusted [ShadowStats, Census and HUD]

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

An

nu

al

Sale

s R

ate

of

Millio

ns o

f U

nit

s

Aggregate Housing Starts (Six-Month Moving Average) To February 2019, Seasonally-Adjusted [ShadowStats, Census and HUD]



Graph 23: Single- and Multiple-Unit, Monthly Rate (2000 to Date)

Graph 24: Single- and Multiple-Unit, Six-Month Moving Average (2000 to Date)

0

20

40

60

80

100

120

140

160

180

200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Th

ou

san

ds o

f U

nit

s

Single- and Multiple-Unit Housing Starts (Monthly Rate) To February 2019, Seasonally-Adjusted [ShadowStats, Census and HUD]

Multiple-Unit Starts

Single-Unit Starts

0

20

40

60

80

100

120

140

160

180

200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Th

ou

san

ds o

f U

nit

s

Single- and Multiple-Unit Starts (6-Month Moving Average) To February 2019, Seasonally-Adjusted [ShadowStats, Census and HUD]

Multiple-Unit Starts

Single-Unit Starts



Graph 25: Housing Starts, Annual Rate by Month (1946 to Date)

Graph 26: Housing Starts, Annual Rate, Six-Month Moving Average (1946 to Date)

0

1

2

3

4

5

6

7

8

9

10

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Millio

ns o

f U

nit

s

Housing Starts (Annual Rate by Month) 1946 to February 2019, Seasonally-Adjusted [ShadowStats, Census and HUD]

Official Recession

Nonfarm Housing Starts (1946-1969)

Housing Starts (1959 to Date)

0

1

2

3

4

5

6

7

8

9

10

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Millio

ns o

f U

nit

s

Housing Starts (Annual Rate by Month, 6-Month Moving Avg) 1946 to February 2019, Seasonally-Adjusted [ShadowStats, Census and HUD]

Official Recession

Nonfarm Housing Starts (1946-1969)

Housing Starts (1959 to Date)



Industrial Production Annual Benchmark Revisions

Industrial Production Annual Revisions Notched Higher—Major Manufacturing Sector Revisions

Were Missing, Yet, Recent Quarterly Data Showed Slower/Slowing Annualized Quarterly Activity.

Slowing quarterly growth in production revisions signaled weakening GDP activity. The annual

Industrial Production Benchmark Revision was published March 27th.

Graph 27: Benchmark Revised Capacity Utilization (2000 to Date)

Discussed in Bullet Edition No. 3, what appears to be a missing headline recession in 2014/2015 never

surfaced because major, belated benchmark revisions showing the downturn did not surface until

2017/2018, as will be fully discussed and reviewed in Special Commentary No. 983-B. Graph 27 shows

that speculative updated plot of the Alternate Recession, incorporating the just-published (March 27th)

benchmarking of Capacity Utilization. While Graphs 28 to 31 plot the benchmark-revised aggregate

Industrial Production series and its Manufacturing, Mining and Utilities components, the important one

for GDP revisions is Graph 28. Standard Manufacturing benchmarking (almost always sharply negative)

for 2018/2019 was not available this time around, thanks to a budget issues at the Census Bureau.

What the revisions reflect is fourth-quarter 2018 Industrial Production slowing from an annualized growth

rate of 4.0% to 3.7% in revision, consistent with a downside revision in fourth-quarter 2018 GDP. Based

on two months of reporting, however, first-quarter 2019 production also is on track to slow sharply, to an

annualized 0.6%, which easily could fall into quarterly contraction in the next round of reporting.

0

1

2

3

4

5

6

7

8

9

10

65%

70%

75%

80%

85%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Perc

en

t o

f T

ota

l U

.S.

Ind

ustr

ial

Cap

acit

y U

tilized

Capacity Utilization: Total U.S. Industry to February 2019 Benchmarked With An Alternate Recession Definition Percent of Capacity, Seasonally-Adjusted [ShadowStats, FRB]

Alternate Definition and Prospective Recession

Prior Capacity Utilization

Capacity Utilization

https://www.federalreserve.gov/releases/g17/revisions/Current/g17rev.pdfhttp://www.shadowstats.com/article/cSBE3



Graph 28: Benchmark Revised Industrial Production (2000 to Date)

Graph 29: Benchmark Revised Manufacturing, 75.0% of 2018 Industrial Production (2000-to-Date)

0

1

2

3

4

5

6

7

8

9

10

84

88

92

96

100

104

108

112

116

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Ind

ex L

ev

el, 2

012 =

100

Benchmarked Index of Industrial Production (2012 = 100) Level to February 2019, Seasonally-Adjusted [ShadowStats, FRB]

Official Recession

Prior Industrial Production

Industrial Production

0

1

2

3

4

5

6

7

8

9

10

84

88

92

96

100

104

108

112

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Ind

ex L

ev

el, 2

012 =

100

Benchmarked Production - Manufacturing (SIC) (2012 = 100) Level to February 2019, Seasonally-Adjusted [ShadowStats, FRB]

Official Recession

Prior Manufacturing

Manufacturing



Graph 30: Benchmark Revised Mining, 14.6% of 2018 Industrial Production (2000-to-Date)

Graph 31: Benchmark Revised Utilities, 10.4% of 2018 Industrial Production (2000 to Date)

# # #

0

1

2

3

4

5

6

7

8

9

10

70

80

90

100

110

120

130

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Ind

ex L

ev

el, 2

012 =

100

Benchmarked Production - Mining (Including Oil & Gas) To February 2019, (2012 = 100) Seasonally-Adjusted [ShadowStats, FRB]

Official Recession

Prior Mining

Mining

0

1

2

3

4

5

6

7

8

9

10

85

90

95

100

105

110

115

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Ind

ex L

ev

el, 2

012 =

100

Benchmarked Industrial Production - Utilities (2012 = 100) Level to February 2019, Seasonally-Adjusted [ShadowStats, FRB]

Official Recession

Prior Utilities

Utilities

SHADOWSTATS BULLET EDITION NUMBER FIVE · Best Wishes — John Williams (707) 763-5786,...

Documents

Transcript of SHADOWSTATS BULLET EDITION NUMBER FIVE · Best Wishes — John Williams (707) 763-5786,...