The Most Popular & Widely-Referenced Free Annotated Charts for Tracking the Economy
1. GDPNow Forecast for Q3 2017 = 2.7% – As of October 18, 2017
GDP Growth Appears to be Accelerating
8/24/2017 – Economic growth accelerated in the second quarter to an annualized rate at 3.0 in 2Q17, revised up from 2.6% on August 30th, 2017. This was driven by healthy contributions from both the consumer and nonresidential investment. Inventories were slightly negative which detracted , while net exports improved and added to the acceleration. While we expect economic growth will remain stable for the second half of the year, it is unlikely that fiscal stimulus will materialize anytime soon and accelerate the growth outlook.
Last week’s retail sales report suggests that consumer spending remains solid. However, disappointing numbers on industrial production and housing starts point to continued sluggishness in investment spending and this should be confirmed by this week’s Durable Goods report which should look unimpressive, even after making allowances for a very volatile aircraft sector. Real GDP growth for Q3 is currently tracking 3.0%, but on a year-over-year basis this amounts to a very familiar 2.1%.
The economy should grow faster in the second half of 2017
Q2 growth picked up to 3.0% and GDP growth should accelerate and stabilize into the second half of 2017 and through 2018, reflecting a pick-up in exports, inventories and government spending. Stronger investment spending and an improving global economy should be tailwinds, though the prospect of significant fiscal stimulus has diminished, thanks to low unemployment and political turmoil. Regardless, weak productivity and labor force dynamics should prevent any sustained rise in growth above 3.0%.
2. Gross Domestic Product 3.0% Q2 2017
3. Unemployment Rate 4.2% September 2017
Unemployment continues to fall, which should drive up wages
8/24/2017 – While the economy maintains a slow-but-steady pace of growth, the labor market has continued to tighten. This reflects two key trends: Low productivity growth, which implies most GDP growth has to come from employing more workers, and low labor force growth, which means that much of the job growth has come from re-employing the unemployed rather than new workers entering the labor market.
Solid GDP growth in 2017 and 2018 should cut the unemployment rate further, perhaps falling to 4% by the end of this year and 3.5% by the end of next year. With wages already appearing to pick up, this should cause a further acceleration, particularly as workers and employers recognize the difficulty in hiring and retaining competent workers.
4. Non-Farm Payrolls +146,659 October 6, 2017
Jobs Remain Strong
8/24/2017 – The July employment report showed that the U.S. economy added 209,000 jobs last month, once again surprising well to the upside. The unemployment rate fell to 4.3% despite an increase in the participation rate to 62.9%, continuing a long-term trend of a healthy labor market. Nonetheless, wage pressure continues to fail to materialize, with production and nonsupervisory wages rising only 2.4% year-over-year. That said, should the labor market continue to tighten, expect wage pressure to build.
5. Four-Week Moving Average of Initial Claims – 248,250 October 19, 2017
6. Commercial and Industrial Loans, All Commercial Banks – $2.101 Trillion – July 2017 – Updated September 8, 2017
7. Total Unemployed, U6 – 8.6% September 1, 2017
8. Consumer Price Index – July 2017 – +1.7% Updated August 11, 2017
Surprisingly, We Have Not Seen Inflation Pressure, At Least Not Yet
Inflationary pressures remained subdued in July, with headline CPI up just 0.1%, and bringing the year-over-year number to 1.7%. Core CPI rose similarly over the month, remaining at 1.7% year-over-year. The mild increase in headline CPI came from shelter, medical care and food, with energy prices falling slightly over the month. Additionally, PPI came in softer than expected, falling -0.1% over the month, which indicates that the Fed’s preferred measure of inflation (PCE) could also come in slightly below expectations in July.
9. Personal Consumer Expenditures – July 2017 – +4.2 Updated August 31, 2017
10. Industrial Production Index – July 2017 – +2.2584 Updated August 17, 2017
11. Kansas City Fed Labor Market Conditions Index, Level of Activity Indicator – July 2017 – +0.51483 Updated August 9, 2017
12. Manufacturers’ New Orders: Durable Goods – July 2017 – +$228,922 Updated September 5, 2017
13. Total Construction Spending – July 2017- +$1,211,508 Updated September 1, 2017
14. Leading Index for the United States – July 2017- +1.22 Updated August 29, 2017
15. Velocity of M2 Money Stock – Q2 2017- +1.427 Updated August 30, 2017
16. Total Vehicle Sales – July 2017- $17 Million Updated August 3, 2017
17. Federal Debt to GDP – Q2 2016 – 1.03% Updated September 8, 2017
18. Federal Debt: Total Public Debt – Q2 2017 – $19.446 Trillion Updated September 8, 2017
19. New One Family Houses Sold: 571,000 Updated 8/23/2017
19. Corporate Profits $1.8 Trillion Q2 2017 Updated August 30, 2017
With 471 companies having reported (96.8% of market cap), our current estimate for 2Q17 is $30.61 ($24.61 ex-financials). Our model is currently tracking 19.1% y/y operating EPS growth. Most companies that have reported have beaten expectations on both an earnings and revenue basis, with 73% beating on earnings and 56% beating on revenue. Strength in top line growth and margin expansion contributed to the strong earnings growth. We saw strong growth in energy, due to weak y/y comparisons, technology, financials and telecom.
19. Effective Fed Funds Rate = 1.16% September 1, 2017
8/24/2017 – Despite a very tight labor market, wage growth remains soft with average hourly earnings for production workers up just 2.4% year-over-year in July. Consumer inflation also looks very tame with July core CPI inflation of just 1.7% year-over-year, its lowest reading since the start of 2015. A weaker dollar may boost inflation a little over the balance of the year and economists can point to plenty of one-time drags on inflation which may fade. However, a persistent shortfall in inflation in recent years probably reflects a long-term structural shift in the balance of power towards buyers and away from sellers of labor, goods and services, suggesting little risk of a sharp rise in inflation in the absence of some very major shock.
Source: Federal Reserve, St. Louis Federal Reserve, Atlanta Federal Reserve, US Treasury & U.S. Bureau of Economic Analysis