With the massive amount of data available it can be hard to
get a grasp on what is going on. I tend
to look more at the big picture and trends, as opposed to the data points. So here it goes:
- GDP growth is slow – 2% for Q1 and 1.70% for Q2 (revised up today). Year end estimates are in the 2% range.
- Employment isn’t good. But hey, doesn’t look like mass layoffs are coming up soon either.
- Housing starts have bottomed and are in an uptrend. Maybe even prices (?) have bottomed. Just don’t expect a massive V recovery in either.
- Real income growth is weak and still below the 2008 peak.
- Retail sales were up, but that was after a decline. It’s not clear whether the trend will move down, sideways, or reverse back to up.
- Industrial production continues to expand and is in an uptrend. The ISM Index indicates a slight contraction.
So the bad news is I wouldn’t expect a massive jump in
GDP. None of the above metrics (or any
others) seems to indicate that. This is
because employment is terrible and income growth is weak. Without higher incomes, there is less demand;
less demand equals lower revenues, which in turn leads to lower
employment. This is why I am opposed to
deficit reduction now.
On the plus side, nothing appears to be rolling over. Retail sales were close, but the most recent
jump at the very least gave pause to its recent moves down. Hopefully this actually reverses the trend
going forward. Housing is now a tailwind
as opposed to a headwind. And
manufacturing, while not roaring, is chugging along.
Ultimately, this is indicative of a slow growth economy, but
not one that is cratering or in recession; although, the latter is more
semantics at this point than anything.
