Recent reports from the U.S. Bureau of Economic Analysis indicate a decline in consumer spending and disposable personal income last month. This trend is concerning, as both indicators have been experiencing a downward trajectory for the past two years. Furthermore, this data suggests that the economic cushion is diminishing, leaving little room for optimism regarding a potential reversal in this trend.
A few months back, I analyzed the comparative market capitalizations of stock markets worldwide. While this exercise is somewhat academic, it can provide valuable insights for portfolio construction and assessment of current asset allocation strategies. Market benchmarks, represented by Mr. Market’s preferences, offer a solid foundation for evaluating risk, especially if your portfolio is skewed towards or away from specific markets.
The anticipated update on personal consumption spending for April suggests a 0.2% increase compared to the previous month, based on The Capital Spectator’s average econometric forecast. This forecast aligns with the earlier reported increase for March. The Capital Spectator’s prediction sits at the higher end of consensus estimates derived from economists’ surveys.
This week’s jobless claims report yielded some stable news, as filings for unemployment benefits slightly rose by 10,000 to a seasonally adjusted total of 354,000 last week. This fluctuation is relatively minor when considering the inherent volatility of this data. Notably, claims remain just above the five-year low of 327,000 observed during the week ending April 27, 2013. This trend offers hope that the upcoming May payroll report (set for release on June 7) will indicate continued moderate growth.
The current economic landscape, observed through a market-oriented lens, indicates that business cycle risk remains relatively low. As of yesterday (May 28), the Macro-Markets Risk Index (MMRI) stood at 15.6%—a comfortable distance from the risk zone of 0%. This figure stays within the 10% to 17% range that has persisted throughout 2013. A reading below 0% suggests a heightened risk of recession, while values above 0% correlate with economic growth.
Recent data reveals that home prices have surged by 10.9% year-over-year, according to the March update of the 20-city composite S&P/Case-Shiller Home Price Index—the fastest annual increase in seven years. Simultaneously, consumer confidence has reached a five-year high this month, as reported by the Conference Board reports. While these data points alone may seem questionable, a broader context of economic indicators suggests that the economy is likely to maintain modest growth for the foreseeable future.
The projected growth rate for the second quarter of U.S. GDP is anticipated to be 2.3% (real seasonally adjusted annual rate), based on The Capital Spectator’s average econometric nowcast. This estimate has been revised down from the initial forecast of 2.9% published on May 6.
● Balance: The Economics of Great Powers from Ancient Rome to Modern America
By Glenn Hubbard and Tim Kane
Review via Publishers Weekly
In this thought-provoking economic history, economists Hubbard (dean of Columbia University’s Graduate School of Business) and Kane (chief economist of the Hudson Institute) argue that political paralysis leading to fiscal collapse poses an “existential threat” to America. They explore historical economic missteps from ancient Rome and Ming China to modern Europe and the U.S., framing the ongoing debate about national decline in new economic terms. They assess countries based on their “economic power”—combining GDP, productivity, and growth measures—positioning America at the top, albeit precariously.
April saw a rebound in new orders for durable goods, showing a 3.3% increase following a significant decline in March, according to reports from the Census Bureau reports. This growth exceeds economists’ expectations, which were outlined in a median forecast compiled by Bloomberg. Additionally, business investments (excluding aircraft and defense capital goods) rose by 1.2%. The more encouraging aspect of this release is the stabilization observed in both sectors when considered year-over-year. Could this indicate an end to the prolonged slowdown in new orders?
In recent news, jobless claims fell by 23,000 to a seasonally adjusted total of 340,000 last week, nearing the five-year low of 327,000 from the week ending April 27 last week. The consistent proximity of new unemployment filings to this cyclical minimum gives rise to optimism for stable growth within the labor market in the near term. Adding to this positive sentiment is the results from today’s Markit Flash U.S. Manufacturing Purchasing Managers Index (PMI) for May, which indicates that the sector is still in a state of growth, though at a decelerated pace this month.
In summary, while certain indicators show signs of stability and potential growth, caution remains warranted as the economic landscape continues to evolve. Keeping an eye on these metrics can help in navigating future trends effectively.