Morning Report: Blowout GDP number 7/27/18

Posted on July 27, 2018 by Brent Nyitray

Vital Statistics:

Last Change
S&P futures 2842 2
Eurostoxx index 391.88 1.35
Oil (WTI) 69.55 -0.1
10 Year Government Bond Yield 2.95%
30 Year fixed rate mortgage 4.62%

Stocks are up this morning after blowout earnings from Amazon and a strong GDP report. Bonds and MBS are up.

Second quarter GDP came in at 4.1%, a big jump from the first quarter, and the highest print in 4 years. Q1 was revised upward to 2.2% from 2.0%. The inflation numbers were good as well. Q2 inflation came in at 1.8% which was a decrease from the 2.5% pace in Q1. Ex-food and energy, prices increased 2%. Consumption increased 4%, while investment increased 2.1%. Capital Expenditures increased strongly, while residential construction fell. Inventories fell, which dismisses the talking point that Q2 was artificially boosted by inventory build ahead of a trade war.

Note that international trade was a big boost to GDP numbers. While economists talk about trade wars negatively affecting growth, remember that GDP includes the net trade balance. So if imports fall in response to tariffs, that will actually increase GDP. Does that mean you can goose growth via trade spats? No, but trade wars that reduce the trade deficit will bump up the GDP numbers, which is largely an accounting question.

In the wake of the GDP report, the Fed funds futures are predicting a 90% chance of a Sep hike and a 68% chance of a Sep and Dec hike.

Freddie Mac reported that delinquencies fell in June and they are back to pre-hurricane levels.

Foreign demand for US residential property fell in 21% Q1, according to NAR. Foreign buyers accounted for 8% of existing home sales, a drop from 10% in the previous period. While a drop in foreign buying will help alleviate the supply / demand imbalance in the US resi market, new construction is really needed to square the circle, and judging by the GDP numbers, that still isn’t happening.

Filed under: Economy, Morning Report |

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28 Responses

    • jnc4p, on July 27, 2018 at 1:07 pm said:

      Interesting that small retailers are now the new protected class.

      But not surprising at all that the city looks to blame everything but government policy for the problems.

      Liked by 1 person

      Reply
      • Brent Nyitray, on July 27, 2018 at 1:19 pm said:

        But lets put these propellerheads in charge of the economy. Cause socialism is TOTALLY going to work if we put the right people in charge.

        Liked by 1 person

        Reply
        • jnc4p, on July 27, 2018 at 3:05 pm said:

          One thing to keep in mind is that the goals aren’t shared.

          Economic growth and wealth creation aren’t goals of socialists if it comes at the price of inequality. So it may well succeed on it’s own terms.

          Liked by 1 person

        • Brent Nyitray, on July 27, 2018 at 4:14 pm said:

          Yes unequally shared prosperity < equally shared misery…

          Liked by 1 person

    • Kevin S. Willis, on July 27, 2018 at 4:23 pm said:

      I think there’s an assumption that the companies will go along with it, won’t relocate, and won’t find away around it, and that it won’t provide other incentives (like, say, free healthy-snack vending machines) that honor the letter of the law without actually getting people to leave and frequent local restaurants.

      I’m just against this kind of micromanagement on principle. But if Facebook wants to be ultimately run by the city council, I guess that’s their choice.

      Like

      Reply
  2. Let the mutherfuker burn!, on July 27, 2018 at 1:48 pm said:

    Good. They can retrain for jobs Americans won’t do.

    https://www.campusreform.org/?ID=11161

    Liked by 1 person

    Reply
    • Kevin S. Willis, on July 27, 2018 at 4:27 pm said:

      Certainly adds to the creep factor. But at what point will enough people be offended enough by Trump as a person to turn over the country to people they trust far less on policy? I guess we’ll see in November!

      Like

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  4. jnc4p, on July 27, 2018 at 3:14 pm said:

    The parallels between Gwyneth Paltrow’s Goop brand strategy vs fact checkers and Trump’s are interesting:

    https://www.vox.com/science-and-health/2017/7/19/15988180/gwyneth-paltrow-goop-jade-egg-debunkers

    Like

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    • Kevin S. Willis, on July 27, 2018 at 4:47 pm said:

      Indeed.

      I’m a journalist, not an educator or policymaker. But for the educators and policymakers reading this, please take a hard look at your school curricula and the critical thinking skills they offer. It may be too late to dent Paltrow’s brand among her acolytes, but you might be able to stop the next Goop train from taking off.

      It’s a nice thought, but there’s no ideological or practical motivation to do so. Ideologues generally don’t have a lot of motivation to encourage or teach critical thinking. Certainly, the vast majority of journalism doesn’t seem big on critical thought or careful analysis. Just look at our colleges–and our tenured professors–and ask how likely it is that critical thought and objective analysis is going to be taught at any age?

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  5. jnc4p, on July 27, 2018 at 3:17 pm said:

    It’s amusing how clueless Vox is sometimes. It’s not about irony or not getting intent, it’s about having a single standard with no exceptions if people are going to lose their jobs over things they post on the internet.

    If Milo is out because of pedophilia jokes, so is Gunn.

    https://www.vox.com/2018/7/27/17604604/alt-right-internet-mobs-shock-humor-gamergate-james-gunn-dan-harmon

    Like

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    • Brent Nyitray, on July 27, 2018 at 4:17 pm said:

      The left is so self-unaware it isn’t even funny. They honestly think the internet outrage / doxxing mob is a right wing phenomenon.

      Like

      Reply
      • Kevin S. Willis, on July 27, 2018 at 4:39 pm said:

        I was listening to a PodCast on geek stuff that I quite enjoy, when one of the folks complained about how right wingers just shut down rational discussion, right around the same time that he said anyone who mentions Roseanne Barr in connection with James Gunn, that discussion is just OVER.

        While I don’t like the direction any of this is going, at all, from the left or right, I think there’s an area where we can acknowledge certainly things are super-creepy and almost kind of red flags, while not making firing and public pillorying the default behavior for everything.

        … but this article is another example of the ongoing delusion and detachment from reality going on in no small part because of what the Internet makes possible. And what a lot of people on the Internet STILL don’t know the Internet makes possible.

        While I can kind of agree that a lot of the attacks going on are pure trolling, and in 100% bad faith, the article itself is written in bad faith, attributing this all to the right wing (Gunn apologized for those old tweets over 5 years ago, at the time under attack from the left) while the same folks are real-life doxing Trump supporters at restaurants, amongst other things.

        Ugh.

        Anyway, this isn’t an ideological phenomenon. It’s some kind of instinctual compulsion in a large segment of humanity, where the poo will be flung at whomever a particular person thinks is their enemy for tribal reasons. Choice of targets may be ideological, but the urge to do it doesn’t seem to know partisan barriers. All of it seems to be pushing further and further towards restricting or punishing free speech, from both the left and the right. And it’s worrying, but hopefully we’ll grow out of it at some point.

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    • Kevin S. Willis, on July 27, 2018 at 4:55 pm said:

      I’m hoping Harmon isn’t out. While his pedophilia-joke version of Back to the Future (The Real Adventures of Doc and Mharti) is just animated pedo-porn, I’m a huge fan of Rick and Morty. I’d hate to see that end.

      And I’m sure both Milo and Gunn will find interesting things to do, and probably return in some form, possibly sooner rather than later. Gunn has a lot of sympathy in Hollywood, and will be getting offers from studios not as invested in their squeaky clean brand.

      But I think a lot of this is because Disney needs to be seen as even-handed. They didn’t feel they could stick up for Gunn after firing Roseanne in under 24 hours after the racist tweet. They can’t say racist jokes are bad but pedo-jokes are okay, and the time frame that so many of the left say exonerates Gunn doesn’t work for Disney branding.

      And firing Gunn is also kind of a license to fire the next Roseanne or Tim Allen they want to get rid of. “Look, we’re fair, we have standards! Hey, we fired Gunn!”

      Like

      Reply
  8. Brent Nyitray, on July 28, 2018 at 10:53 am said:

    Interesting read:

    https://chicago.suntimes.com/business/trump-charms-downstate-steel-workers-granite-city-illinois/

    Yes, Trump probably won’t be able to reverse the effects of globalization that killed manufacturing jobs, but at least he gives a damn.

    obama’s interest in manufacturing basically began and ended with the environmental impact and whether transgender employees could use the restroom of their choice.

    Liked by 1 person

    Reply
  9. Let the mutherfuker burn!, on July 28, 2018 at 11:18 am said:

    Among the many unintentional funny things in the article is this,

    In the past, in Trump’s view, the United States was a naif being swindled by “the worst trade deals every made in history.” Until he came along. Now “we have the best economy we ever had in the history of our country.”

    That isn’t true. But it sounds good.

    How, after a lifetime of Trump do they not get it and that Trump’s targeted audience gets it? He’s a salesman, everything without his product was the worst and becomes the best with his product. All exaggeration is lying but so what? Do they pretend not to understand or do they not understand? His audience certainly does.

    He pandered shamelessly to his audience.
    “We need steel,” he said. “We need steel plants. And to see an old, big monster plant like this re-opening — that is an honor. I look at the faces of you people; I could be one of you. I like you guys. I could be one of you.”
    That struck me as either sincere or an amazing facsimile. The workers, for their part, couldn’t give him a standing ovation because they never sat down.

    The other thing that is weird is the seeming amazement that a POTUS would pick industries to support and protect, especially steel. I’m pretty sure that Every POTUS since Johnson has done this.

    And pandering shamelessly? That’s new and/or suddenly bad? Name a POTUS that hasn’t? Clinton promised, sincerely, to have a Kosher kitchen in a the Whitehouse when he was speaking to a Jewish group in 1992. Obama claimed that his ascension was the moment the seas would stop rising.

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    • Kevin S. Willis, on July 28, 2018 at 5:50 pm said:

      It’s just tribalism. They have their side, and they know who their tribe is. There’s no reason to go fault finding with their own tribe. Fault finding is exclusively for the other tribe.

      They even have magic words if you ever try to point these sorts of things out: “false equivalence”. Like “abracadabra”, just saying them invalidates any comparison between what their tribe does or has done and what other tribes do or have done. No matter how similar or perhaps identical the practices actually are.

      Like

      Reply
  10. Let the mutherfuker burn!, on July 29, 2018 at 2:32 pm said:

    Heh

    Like

    Reply
  11. Let the mutherfuker burn!, on July 29, 2018 at 6:22 pm said:

    This thread is FANTASTIC!!

    https://m.dailykos.com/stories/1784391

    And yes Christian Dominianist make an appearance!!!!

    Like

    Reply
  12. Let the mutherfuker burn!, on July 29, 2018 at 10:35 pm said:

    This is funny.

    Like

    Reply

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