Terence Grennon’s Post

The Bureau of Economic Analysis (BEA) reported that the US economy grew at a 2.8% pace in the 2nd quarter, double the 1.4% pace in the 1st quarter, and well above expectations of a 1.9% gain. The composition of the gain was good, with improving consumer spending and business fixed investment. In a typical late stage of the business cycle, the latter generally takes over from consumer spending as the driver of the economy. There was some inventory building and government spending on goods & services rose as well. Economic activity in the 2nd quarter as up 3.1% y/y. The report will cause economists to boost their 2024 growth forecasts, likely by about 0.2 percentage points. That said, this is an advance estimate. In August, a “second” estimate for the 2nd quarter, based on more complete source data, will be released and the headline growth figure will likely be revised. Moreover, in late-September an annual revision to the national economics accounts will be released.  These revisions will re-write history from 1st quarter 2019.

Investors are looking at recent economic data for hints about the future of interest rates and the state of the economy. Here are some of the most important indicators to take note of. https://lnkd.in/gnWJzcrh 

The U.S. economy gained momentum in the second quarter, with consumer spending fueling a robust 3.0% annualized growth, the Commerce Department's Bureau of Economic Analysis confirmed on Thursday. This marks a significant acceleration from the revised 1.6% growth in the first quarter, solidifying the nation's economic recovery. While economists had predicted no change from the initial GDP estimate, the government also revised national accounts data, showing stronger economic growth and corporate profits in 2023 than previously estimated. A notable aspect of the report was the narrowing gap between GDP and gross domestic income (GDI), a measure that some economists use to gauge the economy's true health. GDI surged by 3.4%, up from a prior estimate of 1.3%, aligning more closely with GDP figures and signaling sustained economic resilience. The average of GDP and GDI, often considered a better reflection of overall activity, also climbed to 3.2%, further underscoring the U.S.'s stronger-than-expected performance. #USEconomy #GDPGrowth #ConsumerSpending #EconomicRecovery #GDIGrowth #EconomicForecast #CorporateProfits #USTrade #MarketTrends https://lnkd.in/dzp-aYNU

Have you ever found it challenging to understand economic news? If so, this post is for you. Most economic news reflects four key variables that convey information about a country's economic health. Understanding these variables is essential for assessing whether the economy is growing or shrinking, and it helps policymakers determine which policies to implement. These four concepts are Gross Domestic Product (GDP), inflation rate, interest rate, and exchange rate. I like to refer to them as the "Big Four" of the economy. Let's start with GDP. It represents the total transactions that occur in an economy among economic agents. These transactions occur when we exchange value for money. Governments, regardless of their economic system, often aim to increase GDP because it usually leads to an improved standard of living. GDP usually increases due to two outcomes: an increase in the general price level of goods or services, or an increase in the output produced by economic agents in the country. It's important to note the difference between nominal GDP, which is affected by changes in prices, and real GDP, which reflects changes in the volume of goods and services produced. Focus should be on real GDP figures, as they represent the actual growth in the economy. An increase in GDP leads to job creation, which in turn fuels more spending, income for firms, and tax revenue for the government. This cycle contributes to further investments in infrastructure and welfare. The key driver of GDP growth is job creation. If GDP growth does not lead to more jobs, the economy is not truly growing. The second important variable is inflation. It measures the decrease in the value of money over time, which erodes our purchasing power and ability to buy goods and services. Managing the value of money is the responsibility of the highest monetary authority in a country, such as the Central Bank of Nigeria for Naira, the Federal Reserve for US dollars, and the Bank of Japan for Japanese Yen. Inflation usually occurs when there is an excess of money in the economy, leading to more money chasing fewer goods. Central banks work to manage the money supply to maintain the balance between the price level and the value of money. The topics of interest rates and exchange rates will be covered in the next post.

Wondering what the latest economic data reports mean for the overall health of the economy? Check out this week’s Economic Release Snapshot from Commonwealth, director, fixed income, Sam Millette. #economicdata

https://lnkd.in/dmvwEMEk Of course economists were too bearish on the economy last year. The dismal scientists get their forecasting wrong more often than not. The more interesting question is: why the inverted yield curve got the economy wrong last year.

The December 2023 US Leading Economic Index (LEI) report is available.   Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board, said, “The US LEI fell slightly in December, continuing to signal underlying weakness in the US economy. Despite the overall decline, six out of ten leading indicators made positive contributions to the LEI in December. Nonetheless, these improvements were more than offset by weak conditions in manufacturing, the high interest-rate environment, and low consumer confidence. As the magnitude of monthly declines has lessened, the LEI’s six-month and twelve-month growth rates have turned upward but remain negative, continuing to signal the risk of recession ahead. Overall, we expect GDP growth to turn negative in Q2 and Q3 of 2024 but begin to recover late in the year.”   Explaining the LEI (this is for academic purposes; it isn’t investment advice): The LEI is a predictor (indicator) of future US economic activity (source: A Guide to Everyday Economic Statistics, Clayton, Giesbrecht, and Guo, 2010). It is one of the most heavily watched indicators of future economic activity. The LEI has historically predicted most recessions with a sharp drop. Predictive indicators are, by their nature, imperfect, and thus, the LEI may fail to anticipate or falsely predict future economic activity. For example, the LEI predicted a recession in 1984, but massive federal deficit spending appears to have provided enough stimulus to avert a recession.

The Impact of Spending on the Economy: How it Affects Growth and Stimulus Discover the relationship between spending and economic growth, and how it influences stimulus efforts. Explore the current state of the economy and its impact on interest rates. Stay informed and understand why the numbers might not look as promising as before. #SpendingAndGrowth #EconomicStimulus #InterestRates #EconomicNumbers #CurrentEconomicState #EconomicAnalysis #FinancialInsights #EconomicTrends #EconomicOutlook #MarketUpdates

An interesting one pager on the US economy’s direction. Thoughts on this welcome!

Is the economy beginning to show signs of cooling? 🧐 Check out some of the latest thoughts from our Strategic Research team.