It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines:
Q4 Gross Domestic Product
The Commerce Department reported yesterday that the U.S. economy grew at a 2.1% annualized pace in the fourth quarter, which was above estimates for 2% growth. While GDP growth grew at a faster pace than expected in the fourth quarter, total 2016 GDP growth was only 1.6%. That’s the U.S. economy’s worst performance in five years, and that’s down from 2.6% GDP growth in 2015. And first-quarter 2017 GDP growth is expected to be relatively weak, slowing down to a 1.7% pace.
As you know, the U.S. consumer accounts for two-thirds of GDP growth, and during the fourth quarter, consumer spending increased at a 3.5% rate. That was above the previous estimate of a 3% pace. It also didn’t hurt that exports declined at a faster rate than anticipated and subtracted less than 2 percentage points from fourth-quarter GDP growth.
Consumer Confidence Index
According to the Conference Board’s consumer confidence index, the U.S. consumer remains in good spirits. The Consumer Confidence Index rose to 125.6 in March, which is the highest level in more than 16 years. There are now more positive outlooks surrounding U.S. business conditions, job prospects and personal income growth. Of course, it will be interesting to see how the healthcare debacle last week will impact consumer confidence in the upcoming months.
Overall, the U.S. economy has a relatively solid foundation, but I don’t think it’s at a point where the Federal Reserve will be compelled to increase key interest rates significantly this year. The Fed is closely monitoring market rates, which is the real driver of interest rates in the near term. So unless market rates continue to rise significantly, I look for the Fed to remain accommodative.
That’s all I have for you this week; I’ll be in touch again next week with the latest ratings updates out of Portfolio Grader.
Have a great weekend,