GDP Up and Up, maybe it’s a trend….

One quarter of better than average growth does not indicate a trend but the sharp increase is welcome. Increases in Personal Consumption Expenditures (PCE) and Exports led the GDP growth: Imports decreased for the quarter.

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 110^th consecutive month – some selected comments below; emphasis mine.

• “Business is strong in all regions. Materials are tight. Trucking continues to be a major challenge.” (Chemical Products)
• “Strong economic growth continues to put pressure/strain on capacity, lead time, availability and pricing across a broadening array of commodities and components.” (Computer & Electronic Products)
• “U.S. tariff policy and lack of predictability, along with [the] threat of trade wars, [is a] causing general business instability and [is] drag on growth for investments.” (Electrical Equipment, Appliances & Components
• “We export to more than 100 countries. We are preparing to shift some customer responsibilities among manufacturing plants and business units due to trade issues (for example, we’ll shift production for China market from the U.S. to our Canadian plant to avoid higher tariffs). Within our company, there is a sense of uncertainty due to potential trade wars.” (Food, Beverage & Tobacco Products)
• “The economy and product demand still continue to be strong. Having trouble finding people [to fill] blue collar positions. Lead times for parts and materials are moving out, and we are seeing commodity cost pressures increases with the threat of tariffs. Additionally, suppliers are asking for more price increases.” (Machinery)

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

According to the Bureau of Labor Statistics disposable personal income increased by 4.5% compared to an increase of 7% in the first quarter. Personal savings remained essentially constant, 6.8% in the second quarter versus 7.2% in the first. All in all a very strong quarter for our economy.

As we stated the last time we published this update, April of this year, “we continue to believe that during 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.”

The Upward revisions in April seemed to point to a higher GDP, it arrived, hopefully, the trend has begun, we shall see….

Our portfolios favor Domestic Equities, we’ve started to add to our foreign equity positions; our cash position has decreased substantially in recent weeks.

Carlos Dominguez – Portfolio Manager, RJ

*The Atlanta Fed’s GDP Now – https://www.frbatlanta.org/cqer/research/

*https://www.instituteforsupplymanagement.org/about/MediaRoom/newsreleasedetail.cfm?ItemNumber=31024

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