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…
Fourth-Quarter GDP (Third Estimate)
Wednesday’s third and final estimate for fourth-quarter Gross Domestic Product (GDP) growth showed that the U.S. economy grew at an annual rate of 2.9%, up from the 2.5% reading in the second estimate. This result exceeded economists’ expectations for 2.7% growth, thanks in part to the biggest surge in consumer spending in three years. As a refresher, consumer spending is the largest component of GDP, as it makes up more than two-thirds of U.S. economic activity.
While fourth-quarter GDP growth cooled down from the impressive 3.2% pace in the third quarter, overall, the lower figure is not surprising given lackluster retail sales, a growing trade deficit and a record winter. In fact, when you add up all of these factors, it is welcoming to see that GDP growth was able to still reach 2.9%.
What’s great is that there are indications that the U.S. economy will be able to maintain and even exceed this pace. Considering that the most recent durable goods orders surged to an eight-month high and the latest existing home sales jumped 3%, it’s clear that economic activity is beginning to gain steam as we progress through spring. Many analysts are growing increasingly optimistic that GDP growth will reach 3% yet again this year.
Also on Wednesday, the Commerce Department reported that at an early glance, total inventories of merchant wholesalers rose 1.1% to $626.7 billion in February, slightly higher than January’s upwardly revised 1.0%. It appears that companies are starting to replenish their inventories after strong fourth-quarter sales. Sometimes, wholesale inventories can swing enough to affect the GDP outlook, so February’s increase provides further support for improved GDP growth, going forward.
According to The Conference Board’s Tuesday report, the Consumer Confidence Index slipped from an 18-year high of 130.0 in February to 127.7 in March. This fell short of expectations for 131.0 and caps two-straight months of gains. Looking at the details, consumers were less optimistic about current business conditions, with the number of those saying conditions are “bad” increasing from 11.3% to 13.4%. However, there were some bright spots in the report. For example, the share of consumers expecting a short-term decrease in jobs shrank, from 8.6% to 7.2%. In the end, the index remains at a historic high.
I should add that on Thursday, the University of Michigan’s Consumer Sentiment Index came in at 101.4. This is the second-strongest reading in since 2004! Clearly, while a few consumers are feeling more skittish, the majority remain confident about the state of the U.S. economy.
That’s all I have for you this week. I’ll be in touch again next week with the latest ratings out of Portfolio Grader.
Until next week,