There are two reports on the U.S. economy worth mentioning this morning. First, data from the Bureau of Economic Analysis (BEA) showed that gross domestic product (GDP) grew at a faster pace in the fourth quarter of 2015 than previously estimated. Specifically, real GDP, which measures the value of the production of goods and services in America adjusted for price changes (inflation), increased at an annual rate of 1.4 percent in Q4, up from the 1.0 percent preliminary estimate but still below the pace of growth seen in Q2 and Q3 of last year. Adjustments to private inventory investment drove the prior month’s upward revisions but this time it was stronger data on the services component of personal consumption and a smaller drag from trade that were largely responsible for the improvement to headline GDP growth. Looking ahead, the U.S. consumer continues to be one of the main drivers of economic growth but many analysts anticipate only a modest GDP print for the first quarter of 2016 due to last week’s disappointing durable goods report. In fact, the Federal Reserve Bank of Atlanta now expects GDP to grow by just 0.6 percent in Q1, down sharply from the 1.9 percent growth forecast made less than two weeks ago.
Elsewhere, the consumer confidence index from The Conference Board rebounded from February’s upward-revised 94.0 print to 96.2 this month, much better than what analysts had expected. The headline improvement was largely the result of increased optimism about future conditions while consumers’ views of the present situation deteriorated moderately. Roughly a quarter (24.9 percent) of surveyed Americans describe current business conditions as “good,” and 25.4 percent believe that jobs are “plentiful” at the moment. Fifteen percent of consumer respondents feel business conditions will improve over the next six months, 12.9 percent expect a stronger labor market, and 17.7 percent anticipate that their incomes will increase. Lynn Franco, Director of Economic Indicators at The Conference Board, added that “Expectations regarding the short-term turned more favorable as last month’s turmoil in the financial markets appears to have abated. On balance, consumers do not foresee the economy gaining any significant momentum in the near-term, nor do they see it worsening.”
Sources: Econoday, Twitter, Bloomberg, ZH, U.S. Department of Commerce, The Conference Board, Advisor Perspectives (DShort), FRBSLPost author: Charles Couch