Displaying items by tag: GDP

(New York)

For the last eight weeks or so we have been running a “recession watch” theme in articles, but the data is lately looking so good that we are feeling silly. New GDP data was released today and it was nothing short of a blowout. The US expanded 3.2% in the first quarter despite a government shutdown and winter weather. The growth was almost a full percentage point ahead of expectations and well beyond the 2.2% growth of the fourth quarter.

FINSUM: These recession fears seem pretty well put to bed in our opinion. Back in Q4, the declines in a number of indicators seemed to show we may be headed for a recession, but the strong reversal in data suggests this was just an aberration. The market doesn’t seem convinced, though, as Treasuries rallied on this news!

(New York)

The ECB put out research today making an argument that we hadn’t heard very much—that any trade war would hurt the US most of all. According to the ECB, “if Donald Trump’s administration was to raise tariffs and other barriers on imports by another 10 per cent — and other countries were to retaliate — growth would drop more sharply in the US than in either the euro area or China” (quoted from FT). The ECB found that one year of heightened trade tensions could knock 2% off US GDP.

FINSUM: The analysis of the actual economic impact may be credible, but the ECB is totally missing the point about the China. The risk for them is not just economic, but social and political—because they have an unelected government, officials there are under extreme pressure to keep the people happy with economic growth.

(New York)

Headline fourth quarter growth got downgraded this week to just 2.2% (from 2.6%). That may not seem like a devastating fall, but if you take a closer look at the figures, they are worse than at first glance. In particular, it becomes clear that growth was actually weakening all throughout 2018 (versus 2017). While the fourth quarter especially showed weakness, it was really only two one-time quirks that kept growth as high as it was for the year: increased military spending and higher spending by non-profits. Neither of those factors are very tied to the underlying economy and consumers.

FINSUM: This is pretty eye-opening and does sap our confidence a bit. Consumer spending also barely rose in January, which is another negative sign.

(New York)

Another day, another round of bad news on the economy. In what comes as another round of disappointing data, GDP for the fourth quarter was just revised downward from 2.6% to 2.2%, showing the economy finished the year on a softer note than expected. The data adds to the list of poor numbers—labor, housing etc—that have been hitting investors.

FINSUM: Weak economic and housing data have been flowing like a hose lately, and today is no different. This will only add to the downward momentum in yields.

(Houston)

When oil falls it tends to boost the US economy. For all the growth of our shale industry, the US is still a net importer of oil. When prices fall, Americans tend to spend more on other items that boost the economy, so oil prices sinking is usually good news. However, this time around, the fall will be bad, at least according to the Wall Street Journal. The problem is that the oil industry has grown large enough that capital expenditures in the sector make a major impact on growth. Accordingly, the capex cut that will come from falling prices will be prove a net detriment to GDP figures.

FINSUM: When oil fell in 2014-2016, US economic output also slowed, so this is a very real affect. What is worse is that it will likely show up in 2019, which is already looking to be a much weaker year.