On July 3 the Atlanta Federal Reserve’s GDP forecast for second quarter GDP growth climbed to 3% year over year. That’s up from a forecast on June 30 Â for 2.7% growth. If the forecast proves accurate that would be good news for incomes, the economy, and a stock market that has lately been searching for an upward trend. The problem for the forecast, however, is easily summed up in one word: autos.
The Institute for Supply Management’s manufacturing index for June released this morning climbed to 57.8 from 54.9 in May. That was the highest level of the index, where anything above 50 signals expansion, since 2014. Economists surveyed by Briefing.com had projected a slight uptick to 55 for June.Â
Consumer spending picked up in April, signaling that growth in the economy as a whole is headed for a rebound after a weak first quarter. Purchases increased by 0.4% in April, matching projections from economists surveyed by Bloomberg, after a 0.3% gain in March. On the other hand, the Fed’s preferred inflation measure, the PCE, rose just 0.2% in April from March and is now up only 1.7% year over year. That’s below the 2% inflation target set by the U.S. central bank
The second estimate for U.S. GDP growth in the first quarter came in today at a much stronger than expected 1.2% annualized rate. That was an upward revision from a first estimate of 0.7% annualized growth. Economists were expecting a smaller increase to 0.9% annualized growth. The stronger than expected revision locks in an interest rate increase by the Federal Reserve at its June 14 meeting, in my opinion.
I’ll grant you that it’s hard, very hard, right now to pay attention to economic fundamentals. There’s the upcoming OPEC decision on oil production cuts, President Trump’s first overseas tour, the continuing circus in Washington and more. But this week also brings the release of minutes from the Federal Reserve’s May 2-3 meeting and the release on Friday of the second estimate of first quarter U.S. GDP growth.
Modestly disappointing economic numbers released today ahead of tomorrow’s report on first quarter GDP. Not that much seems to matter with the market transfixed by wrangling in Washington over a potential government shutdown, a possible Saturday vote in the House on repealing and replacing Obamacare and speculation just about everywhere on what President Donald Trump’s one-page tax cut proposal actually means
Amidst all the guessing about what Congress and the President will do this week to head off a possible government shutdown when spending authorization ends on April 28, we should remember that we get important data from the real economy on Friday, April 28 as well. At morning we get the initial estimate for first quarter GDP growth. Everyone believes that growth will be weak in the quarter. The question is “How weak?”
