Morning Report: First quarter GDP comes in stronger than expected

Vital Statistics:


Last Change
S&P futures 2939 -3.25
Eurostoxx index 390.26 -0.72
Oil (WTI) 63.11 -0.18
10 year government bond yield 2.51%
30 year fixed rate mortgage 4.23%


Stocks are flattish as we end the month of April. Bonds and MBS are flat.


We have a decent amount of data this week, along with a Fed meeting. The biggest news will be the jobs report on Friday, although we will get income / spending data and the ISM.


Q1 GDP came in at a much higher than expected 3.2% versus the 2.3% growth that was expected. Even better, the inflation rate came in much lower than expected, which should mean the Fed is out of the way. The 10 year bond yield traded below 2.5% for the first time in 2 months, despite having the strongest Q1 growth in 4 years. Note that consumption didn’t drive the increase in growth (it only came in at 1.2%) – the growth was driven by exports  – which at a minimum should end the talking point that Trump’s trade wars are alienating our trading partners.




The immediate market reaction was subdued. The 10 year bond yield drifted lower, stocks were flat, and the Fed Funds futures didn’t change all that much – still predicting a 1/3 chance of no moves this year and a 2/3 chance of a rate cut.


In terms of the individual components, the trade numbers were affected by both an increase in exports (3.7%) and a drop in imports (-3.7%). Durable goods consumption fell 5.3%, which is probably related. Residential continues to be a persistent weak spot (-2.8%), and a bit of a head-scratcher given the sheer lack of inventory. Increased investment was driven by an increase in intellectual property (8.6%), which offset a decrease in building (-0.8%).


Housing’s contribution to GDP has been shrinking since the late 80s. The financial crisis caused it to fall from about 18% to 15%, and in the past decade it has been more or less stuck there. It looks like housing is again beginning to decline as a percent of GDP, and it is now below 15%. If housing can get back to at least normalcy, that should provide a good bump for GDP growth.


housing GDP


Personal Incomes rose 0.1% in March, which was below expectations. Consumption surprised to the upside. Inflation remains tame, with the headline PCE number up .1% MOM / 1.5% YOY and the core up 0.2% / 1.6% YOY.


New FHFA Director Mark Calabria has an ambitious agenda for housing reform, including solving problems with servicing, fixing the QM patch, and eventually releasing the GSEs from conservatorship. He is emphatic that he does not want to see the mortgage market return to the pre-2008 days.

25 Responses

  1. As I’ve said before, I’m so pro choice I’m for forced abortions in some cases. What’s interesting about this front page post at DKos is that it isn’t until about the 15th comment that somebody finally ties it to what Governor Coonman said, and they end-up confirming exactly what Trump said!


    • When Trumpenfuhrer Ignorant Moron Supporters have no defense against charges brought up against the Grabhersnatch then they Lie and Defy, Delay and Deflect, Confuse and Squirm. They are Disingenuous and Deceptive.

      A lot of the commentors there seem to have what would in any other context be considered a diagnosable mental illness.

      You should really be more empathetic towards the mentally ill and disabled.

      That being said, I can’t guess what the 15th comment was when you read it. 😉


    • I think that AGW “research” constitutes an excellent example of the problems the author is illustrating, down to the fact he studiously avoids mentioning it. I think that’s the only tactic available to “global warming deniers” trying to attack the methodology used to produce the apocalyptic climate change predictions and justify cap-and-tax-but-mostly-tax boondoggles.

      He’s attacking the exact sort of methodology that has lead to bogus climate change assessment and predictions without once mentioning global warming or climate change.

      Otherwise, that piece would never have been published in Nature.

      They have introduced requirements that data and scripts be made open and methods be described fully.

      This statement might as well be explicitly about climate change models.


  2. Proving everybody backs the strong horse.

    And also, hypergammy.


    • nobody had even heard of AOC till the NYT and the rest of the leftist media declared her their “it girl.”

      then they bitch when people talk about her after she says something stupid.


    • That fate, at least, I avoided a few weeks back. Instead, there I was with the commentator Ben Stein hovering over me like some grim heathen god, exuding all the effervescent charm of a despondent tree sloth, glumly wobbling his jowls and opining that Representative Alexandria Ocasio-Cortez espouses a political philosophy that in the past led to the rise of Hitler and Stalin.

      Which is arguably true. Stalin and Hitler may have both had a beef with the Communist and many different flavors of socialist, but it’s not wrong. A more on-point example would be Venezuela I think.

      The author identifies the wrong program. They need to say: we aren’t talking about socialism. We’re talking about capitalist societies with more social programs and a better social safety net! Not, “Look, socialism isn’t so bad!”

      Now, I realize that this has become axiomatic on America’s excitable right. I know also that in this country we employ terms like “socialism” with wanton indifference to historical details and conceptual distinctions.

      Look, I realize that me and my friends are far smarter than all you mouth-breathing rubes too stupid to vote and live like we tell you to, but . . .

      I grasp too that many among us truly believe that, say, a higher marginal tax rate or a public subsidy for poor children’s dentistry is only a step away from the gulags.

      Children’s dentistry leads directly to the holocaust. It’s been demonstrated time and again. But, seriously, he’s describing what a largely capitalist society (that embraces private companies and private property) with high taxes can afford to do and not collapse. Not what truly socialist societies produce, reliably, all the time.

      And I am painfully aware that the male Fox commentariat nurtures its sickly obsession with Ms. Ocasio-Cortez partly because they resent her cleverness, charisma and moral vitality

      I love it when credentialed smart people (who are more humane than the rest of us) reveal both their lack of empathy and the sweeping breadth of their own ignorance (or, if you choose, self-delusion). AOC may be smart but she’s not clever–at least, not yet–and has foot-in-mouth disease not all that far from the Prince of Evil himself, Donald Trump. And her moral vitality? Christ, would he describe some fire-and-brimstone moral scold telling everybody they are going to hell from the pulpit of a fundamentalist baptist church in that manner?

      It may be amusing to hear Republicans assert that a military kleptocracy like Venezuela is a socialist country because its government uses that word when lying about itself

      Said without irony. If you get to redefine every socialist country as “not socialist because they make a bad example for what I want to pretend socialism means when you put my intellectual class in charge” then the results are never bad. You always win when you get to move the goal posts whenever you want, even post-facto. When you can declare any movement a field goal for yourself or a foul for the other team in retrospect, you can’t lost!

      Eh, he’s just writing it to get laid.


    • I take this to be a symptom of our unique national genius for stupidity.

      An assessment from which I’m sure he excludes himself. Because obviously he’s not stupid. Just, you know, all you other people.

      In every other free society with a functioning market economy, socialism is an ordinary, rather general term for sane and compassionate governance of the public purse for the purpose of promoting general welfare and a more widespread share in national prosperity.

      The dictionary definition of socialism is generally:

      a political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

      Wonder why he’s not touching on the part where private wealth and private property is frowned upon. Perhaps because in actual socialist and communist systems, the ruling class continues to accumulate property and wealth. It’s everybody else who does not.

      In countries where, since World War II, the principles of democratic socialism have shaped public policy (basically, everywhere in the developed world except here)

      Seriously? I can’t even. We may not be as liberal as Sweden in our public benefits but the idea that the progressivism of “democratic” socialism haven’t infected American development is . . . not factual. Woodrow Wilson? Teddy Roosevelt? FDR? Lyndon Johnson? The War on Poverty and the New Deal? Our massive bureaucratic state? None of those things ring a bell.

      the lives of the vast majority of citizens, most especially in regard to affordable health care, have improved enormously.

      Statistics? In-context comparisons? Hard numbers? No, of course not. Let’s not be silly.

      And the preposterous cost projections that American conservative propagandists routinely adduce to prove that “socialized medicine” or a decent public option would exhaust our Treasury are given the lie in each of those countries every day

      Hard numbers? Statistics? Any mention of the “preposterous” predictions regarding Medicare and the rest of the War on Poverty that turned out to understate the reality?

      I can also tell the difference between Venezuela and today’s Germany, or the Scandinavian states, or France, or Britain, or Australia, or Canada (and so on).

      None of these countries are actually socialist. Everyone can accumulate wealth. Everybody has private property. They are democratic capitalist societies with high-taxes and a spendy government, which is the closest thing to socialism you can achieve in reality without the government collapsing. What’s more, *all* of these countries will have laws the author would not want for their US Utopia, and lack laws they would want preserve (often related to crime and immigration, but sometimes other things as well). So it’s a selective praise for just what the author likes, in addition to praising results that, statistically, aren’t really significantly better than the US (except, perhaps, on metrics of self-reported happiness, which might have more to do with the ethnic homogeneity of the cultures than any social programs).

      where retirement care is humane and comprehensive and where the schools are immeasurably better than ours are

      We spend a ton of money on our schools and higher education is run almost entirely by progressives, so I find that as a complaint interesting. An why say retirement care is humane and comprehensive when you mean “provides government-funded euthanasia”? These guys can’t be honest can they?

      or squandered through obscene tax cuts for the richest of the investment class.

      Notice no accompanying advocacy for a middle-class tax cut. Because the money going to “the rich” should instead go the intellgentsia, to enlightenedly spend on their pet projects for the benefit of citizens too stupid to spend it correctly themselves.

      We know that, when the child of a working family has cancer, the child should be denied the most expensive treatments, and then probably die, but not before his or her family has been utterly impoverished.

      Argument from edge cases and abstract anecdote is so convincing. The whole piece is nothing but an attempt at fact-free persuasion by rhetoric–after complaining about Stein for doing the same.

      We call this, I believe, being free. And as long as we have access to all the military-grade guns we could ever need to fight off invasions from Venus, and to assure that our children will be slaughtered at regular intervals in their schools, what else can we reasonably ask for?

      There’s nothing in either higher taxes or more socialism that would prevent this. The idea that the military-industrial complex would disappear if we have a UBI or universal healthcare is absurd. You get healthcare costs down, awesome, but that in an of itself will do nothing to discourage US military adventurism.

      The guy has a serious problem with causation. And using words as defined.


      • IMO, the author represents the typical leftist you see in media, the PL, government or academia.

        Overeducated and underpaid (in their eyes).

        Thinks he is worth so much more because he got a PhD and he is smarter than everyone else. Problem is, the real world doesn’t reward people that know the most about Chaucer or political systems, it rewards people that can sell snow to Eskimos.

        The problem is that a decent used car salesman with a GED probably out-earns him and it drives him batty.


        • I feel like it represents a certain level of stunted intellectual growth. I remember thinking–and arguing–in just that way. When I was in eighth grade. My opinions felt so obviously right to me that backing them up with numbers or providing context or accurately representing opposing arguments seemed like a waste of time. Though even then I was biased towards using the dictionary definition of things (I would have argued, using the correct definition of socialism, that socialism was totally awesome because of outcomes not unlike those predicted by the author of this piece).

          I expect–although I think the big problem comes down (as I often suspect it does) to his sense of tribal identity. Him, and those like him, should be ruling the rest of us rubes. Systems that seem to foster the (benevolent) elites ruling the serfs are good, systems that allow the serfs to make their own bad decisions and form their own incorrect opinions in opposition to the elites are horribly, horribly bad.


  3. Apparently Michigan thinks that adoption services exist to benefit gay couples, not orphaned children.


    • By forcing all charities to conform to their values, they bring about more harm than reform. One can only wonder how much more good could be done if these groups devoted their time, energy, and resources to offering services to those in need instead of trying to destroy religious organizations in court.

      Kind of sums up the inherit contradiction (and problem) with leftism/progressivism right there. Although frequently a problem with identitarian groups that emphasize their tribal identification and their moral narratives of good guys and bad guys over productive contribution to humanity at large.


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