Q2 GDP Research Notes

by Jim Baird on July 30, 2014

CaptureEconomy grows at strong 4.0% pace in second quarter

The economy grew at a 4.0% annualized pace during the second quarter, according to this morning’s advance estimate, well above the 3.2% consensus expectation.

Also revealed in today’s report was an upgrade to first quarter results.  While still negative, the degree of drag was reduced to a 2.1% annual rate.  Those revisions also pushed growth in the latter half of 2013 higher to an average rate of 4.0%.

Personal consumption bounced back after a lackluster start to the year, growing at a 2.5% rate.  Of particular note was the sharp increase in spending on durable goods, which increased at a 14.0% rate.

Investment spending increased at a rapid 17.0% annualized clip.  Business investment rebounded nicely to grow by nearly 6.0%, while the housing sector also expanded by a solid 7.5% after two quarters of decline.  If there is a potential source of caution in an otherwise strong report, inventory buildup accounted for 1.6% of growth or about 40% of the 4.0% headline gain.  Some of that increase may have been necessary to adjust for stocks that had been depleted in the preceding two quarters, but could presage a downward adjustment to production – and a moderate headwind to growth – in coming quarters.

Continued improvement in job market conditions and growing consumer confidence should provide continued fuel for the critical consumer sector.  Stronger income growth would be a welcome accelerant, and one that should become more evident as the pool of unemployed and underemployed workers continues to shrink.

Evidence of stronger growth, coupled with the uptick in the pace of job creation, should keep the Fed on their current path toward winding down their bond purchases.  While this reduction in accommodation will need to be overcome and expectations for second-half growth may still be on the optimistic side, the fundamental supports for continued growth appear to be in place.

Economic Perspectives (July 2014)

by Jim Baird on July 30, 2014

After the unsatisfactory first-quarter result and some mixed data to start the second quarter, there’s a heightened sense of anticipation regarding the Q2 GDP growth estimate and what it may signify for the economic road ahead in 2014.  Consensus estimates remain optimistic, pointing to a turnaround in growth, which seems to be supported by employment gains and consumer confidence.

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July’s Consumer Confidence Research Notes

July 29, 2014

Confidence surges in July on improved outlook for jobs and growth The Conference Board Consumer Confidence Index rose sharply to 90.9 in July from its revised June reading of 86.4.  The increase pushed the index to its highest level since October 2007. Confidence has been on a sustained upward trend since last fall, as improving [...]

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July Perspectives Podcast

July 28, 2014

A new PMFA Perspectives Podcast is now available via the link below: July Market Perspectives Podcast

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Market Perspectives (July 2014)

July 22, 2014

Executive Summary Stocks pushed higher again during June, while fixed-income markets were mostly flat. Overall, capital markets turned in a strong first half of performance. Small cap equities were collectively the strongest performers amongst stocks during the month, but larger cap domestic names and international markets also advanced. Treasury yields were relatively flat during the [...]

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Consumer Sentiment Research Notes

July 21, 2014

Sentiment slips in preliminary July release The University of Michigan Consumer Sentiment Index slipped in July to 81.3, a modest decline from the previous month’s reading of 82.5 and a directional surprise given expectations for a modest increase.  With this decline, the index has dipped below its level at the end of 2013, but remains [...]

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June Retail Sales Research Notes

July 15, 2014

June sales fall short of expectations; core result solid for month Retail sales growth has been a disappointment through much of the first half of the year. While the headline number for June was disappointing, there were some underlying pockets of strength. Retail sales grew by only 0.2% in June, falling well short of the [...]

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Economic Perspectives (June 2014)

July 15, 2014

Recent data doesn’t paint a consistent picture, but broadly continues to suggest that growth has rebounded in the second quarter, and most expect growth in the latter half of the year to surpass results for the first six months.  Nonetheless, those expectations have been tempered a bit. Read the full article>>

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Jobless Claims (week of 7.5.14) Research Notes

July 10, 2014

Jobless claims come in stronger than expected; 4-week average nears multi-year low Initial jobless claims fell to 304,000 for the week ended July 5, a decline of 11,000 from the previous week’s print and below the consensus expectation of 315,000 for the week.  That better-than-anticipated result also pulled the four-week moving average lower to just [...]

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June’s Employment Situation Research Notes

July 3, 2014

Payrolls surge as jobless rate falls to 6.1% The job market roared ahead in June, as the economy added a much stronger-than-anticipated 288,000 new jobs during the month.  Further adding to those solid results, nonfarm payrolls for the preceding two months were adjusted higher by another 29,000.  The combined increase of 317,000 easily exceeded the [...]

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