GDP Revised Upwards
According to the most recent ISM® Report On Business® The Institute for Supply Management’s manufacturing report PMI® for January registered 60.8%, compared to last month at 59.1%: In the past this PMI® level have suggested a corresponding increases in real GDP much higher than the average GDP growth rate forecast by The Federal Reserve Bank of Atlanta’s GDPNow™ is forecasting average for a 1st quarter growth rate of approximately 2.5%: better than average (2.1%) but a bit ho-hum in our opinion.
Chart courtesy of Windsor Wealth., and The Bureau of Economic Analysis, The Conference Board and The Atlanta Federal Reserve Bank
The Institute for Supply Management’s report on manufacturing has the sector growing for the 106th consecutive month – some selected comments below; emphasis mine.
- “Availability of electronic components, long lead times, allocations and constraints continue to wreak havoc in the purchasing cycle, with no end in sight at this time.” (Computer & Electronic Products)
- “Our business saw [an] increase in fourth quarter, and it continued in January 2018. CapEx purchase deliveries are moving out globally.” (Chemical Products)
- “Labor market continues to be tight for supply chain talent in the Southern California area. Overall economy is strong.” (Transportation Equipment)
- “Employment is one of our biggest challenges. No labor available.” (Food, Beverage & Tobacco Products)
- “It seems the tax break for business is making a difference. Customers are spending more for capital equipment.” (Machinery)
- “We expect to have a strong year in 2018. In expectation, we have added to our sales staff and plan on adding to our production staff.” (Miscellaneous Manufacturing)
The Conference Board economic indicators represent changes in the indices:
- Consumer Confidence
- Employment Trends index
- Help Wanted Online
- Leading Economic index
- Measure of CEO Confidence
GDP was revised upwards mostly as a result of Personal Consumption Spending. Folks spent more because they had more to spend; wages increased, according to the Bureau of Labor Statistics, by 2.6% for the 4th quarter. That is, incidentally, the highest growth rate since 2008 with the exception the 1st quarter in 2015 which matched the most recent high. This all good news, I think.
In the next few weeks, equity market fluctuations should attenuate somewhat as sentiment transitions from confusion and uncertainty to confidence and renewed faith in economic outcomes associated with a robust economy versus the anemic experience of the last nine years or so.
Upward revisions – there should some more coming our way….
Our portfolios favor Domestic and Foreign Equities, we’ve added commodities; our cash position has increased slightly in recent weeks.
Carlos Dominguez – Portfolio Manager, RJ
*The Atlanta Fed’s GDP Now – https://www.frbatlanta.org/cqer/research/
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