Q4 GDP: Bearish or Bullish on the Recovery?

by Timothy S. O’Neil, SVP, Trust Investment Officer CFP®, CTFA

An article in today’s Wall Street Journal points out an interesting fact: last Tuesday’s decline of 1.2% in the Standard & Poor’s 500 Stock Index snapped a streak of 109 trading days without a decline that large, the longest such streak of the recovery and since the first Clinton administration.

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Investors have enjoyed quite a run of pleasant news since the November election as the recovery rolls on, and just as trees don’t grow to the sky, stock prices do go both directions.  Even were the decline to grow to the 10% mark – which would qualify it as a “correction”, investors should not see that as alarming, as the stock market has historically had one of those about every 12 months.  More economic indicators are due out this week which will give proof that the economy, although not growing nearly as fast as it has in past recovery, or post-recessionary periods, still has not entered either another recession nor is in the grip of runaway growth.  The Personal Consumption Expenditures Core Price Index will be announced on Friday and by this indicator, which is how the Federal Reserve gauges inflation (economists consider the Consumer Price Index to be for amateurs) and at an annualized rate of 2.4% it is not showing any warning signs that growth may have sped up to unsustainable levels.  The final revision to the Gross Domestic Product number for the final quarter of 2016 should see a minor increase to 2.0%: not nearly as fast as anyone would like to see but certainly better than it has been at times since the recession ended in 2009.  Not too fast, not too slow: Goldilocks would appreciate the currents state of affairs.

Weekly Preview

MONDAY –

  • Dallas Federal Reserve Manufacturing Survey
    • Production Index (previous, February):          16.7
    • General Activity Index (previous, February): 24.5
    • General Activity Index (expected, March):     22.0

TUESDAY –

  • International Trade in Goods (in $billions)
    •      Previous (January):                                             -$69.2
    •      Expected (February):                                         -$66.5
  •  S&P CoreLogic Case-Shiller Home Price Index
    • Previous (December, 2016):            +0.9%
    • Expected (January, 2017):                +0.8%
  • Conference Board Consumer Confidence Index
    •  Previous (February):                            114.8
    • Expected (March):                              113.5

WEDNESDAY

  • Mortgage Bankers’ Association Mortgage Applications
    • Purchases, previous:                                           -2.0%
    • Refinances, previous:                                         -3.0%
  • National Association of Realtors Pending Home Sales Index
    • Previous (January):                                              -2.8%
    • Expected (February):                                          +1.8%
  • EIA Petroleum Status Report (in millions of barrels)
    • Crude oil inventories (change, wk ended 3/17):     +5.0
    • Gasoline (change, wk ended 3/17):                            -2.8
    •  Distillates (change, wk ended 3/17):                          -1.9

THURSDAY-

  • GDP, Q4, 2016 (third and final revised estimate)
    • Previous (second revised estimate): +1.9%
    • Third revised estimate:                      +2.0%
  • Initial Unemployment Claims
    •  Previous (week ended 3/17):             258,000
    • Expected (week ended 3/25):            247,000
  • EIA Natural Gas Report (in billions of cubic feet)
    • Previous (change for week ended 3/17):         -150

FRIDAY –

  • Consumer Spending
    • Previous (January):                              +0.2%
    • Expected (February):                          +0.2%
  • Personal Income
    • Previous (January):                                              +0.4%
    • Expected (February):                                          +0.4%
  • Personal Consumption Expenditures (PCE) Price Index (all items)
    • Expected (February):                                          +0.1%
  • PCE Price Index (core, excluding food and energy)
    • Previous (January):                                             +0.3%
    • Expected (February):                                          +0.2%
  • University of Michigan Consumer Sentiment Index
    • Previous (March “flash” reading):                      97.6
    • Expected (March final reading):                         97.6
  • Baker-Hughes Rig Count
    • N.A. rig count (previous, week ended 3/21):                 994
    • U.S. rig count (previous, week ended 3/21):                 809
    • Gulf of Mexico rig count (previous, wk ended 3/21):    18
    • Canada   rig count (previous, week ended 3/21):          185

Source: Wall Street Journal Market Data Center       Not FDIC Insured—May Lose Value—No Bank Guarantee

For Additional Information, Contact Herring Bank’s Personal Trust Team @ (806) 677-7000

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