Donald Trump "loves to hype strong data", says Ben White on Politico.com. So last week's poor first-quarter GDP figure would have been "a significant political blow" to mark his first 100 days in office. The annualised growth of 0.7% was the economy's worst performance since the first three months of 2014. What was that about "making America great again"?
Take the figures with a dollop of salt, says Justin Lahart in The Wall Street Journal. For years now, the first quarter has been weak, largely because of statisticians' problems adjusting the GDP figures for seasonal swings. The figures have always been stronger over the rest of the year. Nonetheless, adds Lahart, it is worrying to note that according to the preliminary figures at least the main problem in the first quarter was the weakest growth in consumption since 2009. Household spending is worth 70% of GDP.
This plays into a key US market theme of recent weeks the gulf between soft data, or surveys, and hard data, ie, official statistics. For instance, retail sales have been weak, yet consumer confidence has climbed to a 16-year high. But the upshot is that these worries look overdone. William Hobbs of Barclays notes that there is no reason to suppose that the surveys' ability to foreshadow the hard data has deteriorated. A chart of the US ISM manufacturing survey (advanced by two quarters) and US GDP shows that these two data points have been in virtual lockstep since 2003.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
And the latest hard statistics point to improvement in any case. Last Friday's payrolls saw the unemployment rate slip to a new ten-year low of 4.4%. April saw 211,000 new jobs being created. "March's weak number seems to have been a weather-related blip," says Alistair Osborne in The Times. There is also "growing evidence that wage pressures may be building". A further interest-rate rise by the US Federal Reserve "is firmly on the cards for next month". The Fed itself certainly seems confident in the economy. It said last week that the "fundamentals underpinning the continued growth of consumption remained solid".
This is just as well, since Trump's tax cuts and spending plans, which were supposed to "usher in a new era of growth and jobs, still look miles away from reality", as Osborne says. But this also means that the odds of the economy overheating, triggering unexpectedly sharp rate hikes that could cause the overpriced market to fall sharply, may have receded. The long post-crisis rally could have even further to go.
Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.
After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.
His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.
Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.
December 2023 NS&I Premium Bond winners - check now to see what you’ve won
If you hold money in NS&I Premium Bonds, you can check from today (2 December) to see if you have won in the December prize draw. Here’s how to check.
By Vaishali Varu Published
OpenAI – corporate drama unleashed
OpenAI, the firm behind ChatGPT, was in uproar as its boss was booted out, briefly snapped up by Microsoft and then brought back again.
By Dr Matthew Partridge Published