This week brought an encouraging glimpse into the U.S. economic landscape for March, highlighted by Markit’s manufacturing survey data. This positive news somewhat alleviates concerns about potential economic downturns. Further insights will emerge later today with the service sector’s equivalent report. Economists, relying on the consensus from Econoday.com, expect the PMI Services Index to maintain its recent progress, which could signal robust growth in this sector of the economy. However, while the end of the first quarter shows slight signs of recovery, the forecast for Q1 GDP remains uncertain.
● U.S. Durable Goods Orders Declined in February | NY Times
● U.S. Mortgage Applications Reach Highest Level Since January | CNBC
● Eurozone M3 Money Supply Grows by 4% in February | Investing.com
● German Consumer Confidence Hits Highest Level in 13.5 Years: GfK | Reuters
● French GDP Growth Confirmed at 0.1% | RTT
U.S. Real Estate Investment Trusts (REITs) continue to outperform other major asset classes over the past year. The Vanguard REIT (VNQ) has achieved an impressive total return of 28.6% as of March 24, over the past 250 trading days, a remarkable performance that no other broadly defined asset class has matched.
● New Home Sales in the U.S. Reach a 7-Year High in February | USA Today
● U.S. Consumer Prices Rebound, Indicating Firm Underlying Inflation | Reuters
● U.S. Manufacturing PMI Reaches a Five-Month High in March | Markit
● French Business Confidence Declines in March, Yet Remains Near Long-Term Average | RTT
● Germany’s Ifo Business Climate Index Increases Slightly | Ifo
● Oil Prices Decline as China’s Strategic Reserves Fill and U.S. Stocks Surge | Reuters
The rationale for anticipating issues in the U.S. economy appears less convincing, thanks to the latest manufacturing activity update for March. Markit’s flash estimate of its purchasing managers index (PMI) for this sector saw a modest uptick this month. This news offers a glimmer of hope for optimists who suggest that the recent spate of underwhelming data may simply reflect the impact of a harsh winter.
It is natural for investors to gravitate toward the positive aspects of finance. The pursuit of higher returns and success in financial endeavors is universally appealing. However, many individuals find greater potential in addressing negative trends in money management—working to minimize or eliminate errors. It is often easier to create value by reducing mistakes than to emulate successful investors like Warren Buffett. This vital yet frequently overlooked principle likely explains why many investors tend to experience returns that lag behind the market.
● U.S. Existing-Home Sales Increased by 1.2% in February | USA Today
● Chicago Fed: U.S. Economic Growth Slows in February | TradingFloor.com
● PMI: Eurozone Growth Gains Momentum, Approaching Four-Year High | Markit
● PMI: German Private Sector Output Rises at Strongest Rate in Eight Months | Markit
● PMI: French Output Increases for Second Successive Month in March | Markit
● PMI: China’s Factory Output Contracts, Reaching an 11-Month Low | Markit
● PMI: Japan’s Production Growth Slows to Weakest Pace Since October 2014 | Markit
According to the latest update from the Chicago Fed National Activity Index, the U.S. economy expanded at its slowest pace in a year during February. The three-month moving average of this key business cycle measure (CFNAI-MA3) dropped to -0.08 last month, down from +0.26 in January. This slowdown marks the lowest reading for the CFNAI-MA3 since February 2014. Consequently, the U.S. economic trend fell to a slightly below-trend level for the first time in a year.
The U.S. economy is projected to grow by 2.1% in the first quarter of this year, based on The Capital Spectator’s median forecast derived from multiple econometric estimates (real seasonally adjusted annual rate). This estimate is slightly lower than the 2.2% growth recorded in Q4 of 2014.
● U.S. Multinationals Anticipate Greater Struggles Due to Strong Dollar | Reuters
● Bullard: Fed Policy Designed for Economic Stability, Not Forex Rates – CNBC | MNI
● Fed Reports: Q4 Household Debt Service Ratio Close to Record Low | Calculated Risk
● Greek and German Leaders Conference Amid Cash Flow Concerns | BBC
● In Greece, Syriza Struggles to Fulfill Promises as Finances Dwindle | NY Times
● OPEC Will Not Support Oil Prices: Saudi Minister | Reuters
In summary, the U.S. economy is currently in a state of cautious optimism. Recent data suggests slight improvements in various sectors, yet significant challenges remain ahead. Continuous monitoring of economic indicators will be crucial in determining the trajectory of growth in the months to come. Understanding these dynamics will enable investors and policymakers alike to navigate the complexities of the economy more effectively.
