GDP/ Stagflation/ Electricity/ Random Charts
GDP Follow Up
Which Fed branch, Atlanta, or NY, was closer on the Q1 GDP call?
Short answer neither.
We know, shocker.
Final estimates:
NY was at 2.63%
Atlanta at -2.7%
So, 2.63 and -2.7% average = -0.035 Actual: -0.03
Wisdom of the crowd, ala Malcolm Gladwell?
With respect to the latest print though we wonder if the Net Export contribution will continue to impact the way it did this print?
Net Export contribution is 3.1% of the total number.
What happens when Personal Consumption and Govt spending slow more, presently at an 85% contribution?
CORE PCE
Wednesday, April 30th, a favorite Federal Reserve metric was released, Core PCE.
The difference between QoQ and MoM caught our eye.
QoQ
MoM
The Q1 Core PCE price moved up more than expected to 3.5%, above the 3.1% estimate, but the Core PCE price for MoM was flat, down from an adjusted +0.5% the previous month.
The delta on this metric is slowing. We know we are a bit in the weeds here, but we were curious to see what has happened historically when there is drawdown of similar magnitudes on the MoM metric.
The chart below provides both metrics above back to 1989, histogram showing QoQ, while the white line is MoM in the top panel.
The middle panel includes the SPX historic EPS. Note, it will not look close to what current earnings estimates are for the SPX index, so providing the exact Bloomberg definition for clarity.
The bottom panel shows the rate of change of the EPS above it.
What’s the point? Well, the point is to suggest that we have yet to experience the impact that is normally felt during times when that Core PCE MoM moves like it has in the past.
Stagflation
There is a prevailing view that tariffs are likely to put upward pressure on prices and downward pressure on the economy.
Apollo takes the thesis a step farther with their scenario analysis:
But is everybody following the above playbook?
https://twitter.com/rwang07/status/1916177259632988233
And, what if some inputs are moving in the opposite direction?
Tough to argue with the relationship below.
And it doesn’t look like there is a desire to reverse that direction in Crude presently.
Older story, but to the point.
Electricity
We have noticed some momentum recently surrounding power demand going forward to drive all the wonders AI will produce for society.
This clip of Eric Schmidt, don’t worry it’s a short 90 seconds, sums up the likely demand situation the US will be facing soon enough.
https://x.com/rwang07/status/1916177259632988233
The above led us to the following:
The accompanying commentary:
AI alone could drive electricity demand equivalent to adding another US economy in the next 5 years.
If onshoring really picks up, the US could be headed for a similar surge in power demand.
Three words come to mind:
Metals, mining, and infrastructure.
Link: https://x.com/TaviCosta/status/1916856036109201634
The above helps explain the below chart as well:
And, if energy really is bottlenecking AI’s future growth, then here is a navigation map.
https://twitter.com/StockSavvyShay/status/1916468093787816211
Random Charts
Couple random charts that caught are eyes this week.
April was tough month for buybacks, but help is on the way with the window about to reopen:
Is the consumer under more duress than we think?
Who’s going to be left to pay for social security?
Have a great weekend!
Best,
Meraki Trading Team
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