Q3 GDP Research Notes

by Jim Baird on November 24, 2015

CaptureQ3 GDP revised higher on smaller inventory drawdown

The economy slowed in the third quarter, but not to the same degree previously believed. Today’s report from the Commerce Department indicated that the economy grew by 2.1% during the quarter ended September 30, a moderate increase over the prior estimate of 1.5%.

Despite a bit of a bumpy ride through the first three quarters of the year, the economy continues to grow in line with a moderate 2.0 – 2.5% trend that has largely defined the past several years. Given the sharp slowdown in China and other emerging market economies and slower global growth this year, the U.S. economy appears to be performing comparatively well.

The report reaffirmed that consumers continued to spend at a solid pace, although the 3.0% advance reflected a modest downward revision. Nonetheless, it’s indicative of a generally upbeat consumer environment, fueled by resurgent job market conditions and elevated confidence.

The most notable adjustment in the report was an increase in business inventories, which were trimmed less during the quarter than previously believed. That reduction still shaved 0.6% off top-line growth, but the drawdown was less than half of the previously reported drag of over 1.4%. That was good news for top-line growth in Q3, but may temper expectations a bit for the closing months of 2015.

Although the report confirmed that the economy softened in the third quarter, the news remains largely positive.  Job creation had lagged in August and September, but rebounded sharply in October.  Retail sales have been soft, but consumer confidence remains relatively upbeat and overall consumer spending has been solid.  With the jobless rate now down to 5.0%, there are some indications that wage gains may be gathering some steam, which should boost the collective consumer mood heading into the important holiday shopping season.  Gas prices have also dropped precipitously in recent weeks, providing a little extra cushion in household budgets for discretionary spending at just the right time.

Market Perspectives (November 2015)

by Jim Baird on November 19, 2015

Executive Summary

  • Domestic equities enjoyed strong returns in October, with the broad market achieving an increase of nearly 8%. Large caps continued to outperform mid and small caps, with the gains in the S&P 500 lifting year-to-date returns back into positive territory.
  • International stocks also bounced back in October as rate cuts and lower bank reserve requirements in China and the prospect of additional stimulus elsewhere created a more upbeat outlook for investors in both developed and emerging-market equities.
  • Fixed-income markets held their ground, while the increased risk appetite that lifted stocks also provided the catalyst for solid returns in credit, most notably in high-yield bonds. As expected, the Fed took no action on interest rates at its October meeting, though policymakers have subsequently hinted strongly at the potential for a December rate hike.
  • U.S. economic indicators were mixed for the month. At 1.5%, the initial estimate for third-quarter GDP came in modestly below expectations, but consumer spending was resilient and the significant drag caused by inventory reductions was viewed as a short- term setback.

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October Retail Sales Research Notes

November 16, 2015

Retail sales disappoint in October Recent data has provided ample fodder for those looking to make either a bullish or bearish case for the near-term outlook.  Put today’s retail sales report in the bearish camp. Retail sales edged upward by a mere 0.1% in October, falling short of consensus expectations for a 0.3% rise. Excluding […]

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October’s Employment Situation Research Notes

November 6, 2015

Nonfarm payrolls surge in October as jobless rate drops to 5.0% Today’s report on the state of the labor market was unexpectedly positive. Nonfarm payrolls surged by 271,000 in October, easily exceeding consensus expectations by nearly 100,000. The October revisions to previously released data also nudged gains from August and September higher by an additional […]

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Q3 GDP Research Notes

October 29, 2015

As widely anticipated, the economy slowed considerably during the third quarter, growing at a moderate 1.5% rate. That result fell fractionally short of consensus expectations for growth of 1.6%. Today’s report represented the first formal look at GDP for the quarter, with two more revisions on tap before year end that could still nudge that […]

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Jobless Claims (week of 10.17.15) Research Notes

October 22, 2015

Initial jobless claims tick up; 4-week average at lowest level in more than four decades Initial jobless claims rose modestly to 259,000 for the week ended October 17 from a revised 256,000 in the preceding week. The 4-week moving average declined to 263,250 – the lowest point since December 1973. Recent employment market data has […]

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September’s CPI Research Notes

October 16, 2015

Consumer prices flat year-on-year; core inflation edges higher Recent economic data has painted a mixed picture, further muddying the waters for investors and policymakers. Today’s data on inflation and jobless claims may not ultimately provide the clarity that either party would prefer, but they should provide some additional boost to the Fed’s case for lifting […]

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September Retail Sales Research Notes

October 16, 2015

September retail sales rise less than expected Retail sales increased by 0.1% in September, falling just short of already modest expectations for a 0.2% rise. Excluding motor vehicle sales, sales fell by 0.3%. August retail sales were also revised down, now reported to be flat for the month. Motor vehicle sales were brisk once again, […]

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Market Perspectives (October 2015)

October 15, 2015

Executive Summary Volatility was elevated in September as speculation about the Chinese economy, the timing of the Fed’s actions on interest rates, and the pace of the U.S. economic recovery continued to be sources of uncertainty for investors. The major U.S. stock indices declined in September, with small caps leading the retreat. The broad U.S. […]

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Economic Perspectives (Third Quarter 2015)

October 14, 2015

While concerns over slower global growth has risen in recent months, the full impact of that slowdown on the U.S. and other developed countries remains to be seen. To this point, a broad range of data suggests that the U.S. economy has decelerated after a strong second quarter but remains on a moderate growth path. […]

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