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Wednesday, August 12, 2009

Q2 GDP Downside Revisions Coming?

Peter Boockvar (via the Big Picture) takes a look at yesterday's wholesale inventory release (been traveling, thus the reason for the late posts):

June Wholesale Inventories, which make up about 25% of Business Inventories, fell a greater than expected 1.7% vs a forecasted drop of .9% and May was revised down by .4% to show a decline of 1.2%. The greater than expected fall IF followed by a similar drop in Business Inventories, will lead to a revision downward in Q2 GDP as the inventory drag would be more than expected.



Back to Peter:
Because sales rose .4%, the inventory to sales ratio fell to 1.26, the lowest since Oct ‘08 when it was at 1.21. While the inventory is somewhat old news, it gives us a snapshot of how the quarter ended and further quantifies the extent of the inventory contraction. It also should follow that the greater than expected drag in Q2 should lead to much less of one in Q3. Business Inventories are out on Thursday.
Don't fret green shoot worshippers. Any Q2 downward revision (Q2 is SOOOO.... last week) means upside potential for the Q3 rebound.

Source: Census