Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Critical US Economic Indication to Watch Out For

Economics / US Economy Mar 27, 2018 - 06:39 AM GMT

By: Rodney_Johnson

Economics Millennials get a bad rap. Sure, they’re the generation that grew up with participation trophies, winning prizes for completing the arduous task of showing up. And with help from their Boomer professors, they have successfully shamed institutions of higher learning, where for centuries debate was considered a search for the truth, into echo chambers of conformity.

I’ve also just learned that this generation has promoted E-sports (that would be watching other people play video games) into such a big deal that the category will get its own E-sports arena in Arlington, Texas.


But they also have made contributions, like adding to our lexicon. Nothing sums up a noncommittal, uninterested response like the word, “meh.” It’s not a verbal eyeroll, it’s more akin to bored sigh, something you utter when you don’t care enough to send your very best.

And it perfectly encapsulates my reaction to this week’s economic news. Sure, the headlines were hyperventilating, but they lack punch.

If you like good news, then you probably saw something along the lines of Tax Reform Will Drive the Economy to New Heights, With Corporations Spending Hundreds of Billions of Dollars in America! Or… Larry Kudlow, as the President’s New Economic Advisor, Will Usher in an Era of Prosperity for Taxpayers! 

If you were looking for reinforcement of negative ideas, then perhaps you read that Trade Tariffs Will Lead to Trade Wars That Bring Us to Our Economic Knees! Or that The New Spending Bill Will Finally Cause Deficit Fears to Explode! 

But there was one important economic detail released this week: the latest GDPNow release from the Atlanta Federal Reserve Bank.

The new estimate throws cold water on the notion of a jump in economic growth, which is something we’ve been harping on for years.

It’s time people pay attention, because rising rates (which the Fed has all but promised) with falling economic activity will put a serious dent in the stock market.

The GDPNow model is the best economic growth forecast I’ve found. It should be on everyone’s economic calendar.

The Bureau of Economic Analysis (BEA) releases its first estimate of quarterly GDP on the fourth Friday after the end of the quarter, so first-quarter GDP won’t be released until the end of April. The first revision of that number is released a month later.

In a digital world based on immediate gratification, we must wait until late May to get a solid read on what happened from January through March. That’s insane!

The Atlanta Fed attacks this problem with what it calls a “nowcast.” The GDPNow model uses up-to-the-minute information to estimate GDP for the quarter, updating regularly until the BEA releases its first estimate.

The GDPNow came out of the gate in January showing first-quarter GDP at 4.2%. Then it shot up to 5.4% when ISM Manufacturing was released on February 1.

It didn’t last long.

After the employment report and auto sales on February 2, the forecast fell to 4.0%. It slipped further after retail trade and consumer prices on February 12, down to 3.2%, then bounced around 3% as different reports came out through the rest of the month.

On March 1, GDPNow shot up to 3.5%, again on ISM Manufacturing, but soon dropped back to 3%.

After the employment numbers last week, the estimate dipped to 2.5%.

The weak retail trade and purchasers’ price index yesterday, along with consumer prices from Tuesday, drove the estimate down further to 1.9%.

Over the course of two months, with economic and market cheerleaders in a tizzy about how we’re exploding to the upside, the best GDP forecasting model I know of has dropped its estimate from a high of 5.4% to just under 2%.

The Atlanta Fed didn’t change its forecast based on hope or some grand idea of what could happen. The analysts at the central bank used hard data.

If something doesn’t change significantly in the next few weeks, we should expect first-quarter GDP of about 2%, well below the rosy forecasts from Washington and Wall Street.

At first, investors might cheer a low number, thinking the Fed will ease off its tightening monetary policy.

Don’t bet on it.

As I cover at length in the April Boom & Bust, the Fed has its own agenda. They need to get back to a neutral monetary policy stance as quickly as possible to prepare for the next downturn. As long their moves don’t kill the economy – and 2% has been the norm for years, so that shouldn’t be a factor – the central bank will stay on course, raising short-term rates and shrinking its balance sheet.

With higher interest rates and tepid growth, equities should take a substantial hit. The GDPNow model is flashing red. We need to pay attention.

Rodney

Follow me on Twitter ;@RJHSDent

By Rodney Johnson, Senior Editor of Economy & Markets

http://economyandmarkets.com

Copyright © 2018 Rodney Johnson - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Rodney Johnson Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules