{"id":1508,"date":"2019-04-26T10:58:19","date_gmt":"2019-04-26T14:58:19","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1508"},"modified":"2019-04-26T10:58:19","modified_gmt":"2019-04-26T14:58:19","slug":"first-quarter-gdp-and-april-consumer-confidence","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1508","title":{"rendered":"First Quarter GDP and April Consumer Confidence"},"content":{"rendered":"\n

KEY DATA:<\/strong> GDP: +3.2%; Consumption:\n1.2%; Investment: +2.7%; State and Local Government: +3.9%; Consumer Prices:\n+0.6%\/ Confidence: 97.2 (Down 1.2 points)<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cThe headline GDP number looks great but the\ndetails are a lot less positive.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  The economy did a lot better than expected\nduring the first quarter as growth exceeded 3%. \nBut let me repeat what I frequently state: The devil – and the real\ninformation – is in the details.  There,\nthe numbers look a lot less positive<\/em><\/strong>. \nTake consumption, please! (Drum roll here.)  We knew that vehicle sales were soft, which\nbrought down durable goods spending.  But\ndemand\nfor nondurables and services was mediocre and with gasoline prices rising,\nthere is little reason to expect households to shop \u2018till they drop this\nspring.  As for businesses, they bought\nlots of software but little hardware and spent even less on structures.<\/em><\/strong>  That doesn\u2019t point to any major investment\nsurge.  And, as expected, housing\nrestrained growth.  So, where did things\ngo right?<\/em><\/strong>  Where I warned there\ncould be some strange results.  Take\ntrade, please!  (Okay, enough Henny Youngman.)  Exports rose while imports fell, meaning the\ntrade deficit narrowed much more sharply than expected. <\/em><\/strong> That added one full percentage point to growth\nand explains most of why growth exceeded forecasts. I had suggested that the\ntariff issues could have led to strange patterns in trade and that is likely what\nhappened in the first quarter.  <\/em><\/strong>There\nis very little reason to think that a strong economy would lead to lowered\nimports, so don\u2019t expect the trade deficit to keep narrowing.  The second place I thought we could have\nsomething strange was in inventories. Warehouses filled sharply, adding two-thirds\nof a percentage point to growth. It is not clear those additions were intended<\/em><\/strong>,\nso don\u2019t be surprised if inventories are drawn down, slowing growth this\nquarter.  Finally, state and local\ngovernments spent like drunken sailors. <\/em><\/strong> This sector added four-tenths of a percent to\ngrowth.  Really, does anyone believe\nstate and local governments will spent so crazily going forward?  Meanwhile, inflation went absolutely\nnowhere.  In summary, the headline was\ngreat but the details were not so good.  <\/em><\/strong><\/p>\n\n\n\n

As for consumer confidence, it faded a touch in April.  The University of Michigan\u2019s Consumer\nSentiment Index dropped modestly as both the current conditions and\nexpectations components declined. <\/em><\/strong> The index\nremains at a high level as respondents are nearly ebullient about their\nfinancial prospects. MARKETS AND FED POLICY IMPLICATIONS: I\nhave been saying for months that the economic fundamentals were solid and the\nFed, make that Chair Powell, panicked in December.  So, I should be happy with this number as it supports\nmy argument.  But the reality is that\ngrowth is not strong, at the least when you consider the performance of the two\nkey segments, households and businesses. \n<\/em><\/strong>Consumption\nwas weak and business investment was mediocre. \nWorse, I don\u2019t see any reason why that would change anytime soon<\/em><\/strong>.  So, what I and probably most other economists\nare doing is making down second quarter growth. \nThe trade deficit should widen and inventories become a drag.  While investors may be happy with this\nreport, and Mr. Powell will have a lot of explaining to do, it really doesn\u2019t\nchange much when it comes to growth: It is decent but not great.<\/em><\/strong>  Now if we back this up with another near-3%\ngrowth rate, I will have to re-evaluate my thinking, but so would the Fed.  Indeed, if spring growth were strong, the Fed would\nbe foolhardy not to consider hiking again, even if inflation remains tame.  In other words, no good economic news goes\nunpunished!<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: GDP: +3.2%; Consumption: 1.2%; Investment: +2.7%; State and Local Government: +3.9%; Consumer Prices: +0.6%\/ Confidence: 97.2 (Down 1.2 points) IN A NUTSHELL:  \u201cThe headline GDP number looks great but the details are a lot less positive.\u201d WHAT IT MEANS:  The economy did a lot better than expected during the first quarter as growth … Continue reading First Quarter GDP and April Consumer Confidence<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1508","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1508","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1508"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1508\/revisions"}],"predecessor-version":[{"id":1509,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1508\/revisions\/1509"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1508"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1508"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1508"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}