Morning Report: GDP comes in better than expected

Vital Statistics:

 

Last Change
S&P futures 3014 7.5
Oil (WTI) 56.51 0.84
10 year government bond yield 2.08%
30 year fixed rate mortgage 4.05%

 

Stocks are higher this morning after good numbers from Google, sorry Alphabet, and Q1 GDP came in better than expectations. Bonds and MBS are flat.

 

The US economy grew at 2.1% in the second quarter, a deceleration from the 3.1% recorded in the first quarter, but higher than the Street estimate of 1.8%. Note that the Atlanta Fed’s GDP Now model was predicting only 1.3% growth as of yesterday, which is a big miss, so perhaps this number will eventually get revised down.

 

In terms of the internals, consumption rebounded rising 4.3%, compared to only 1.1% in the first quarter. Inflation rose 2.3% on the headline number, while the core PCE rose 1.8%. Disposable income rose 4.4%, or 2.5% after inflation and the savings rate fell from 8.5% to 8.1%. Trade was a drag on growth, with exports falling 5.2% and imports flat. Investment was disappointing, falling 5.5% however the first quarter was revised upward from 1% to 3.1%. The economy’s old bugaboo, housing, fell 1.5%. It is strange to think we have a such pent-up demand for housing yet it remains a headwind but here we are. Inventories fell as well.

 

GDP

 

The Fed Funds futures moved slightly. A rate cut next week is more or less a sure thing, and the futures are predicting an 80% chance of a 25 bp cut and a 20% chance of a 50 bp cut. This is realistically the last data point before the Fed meets next week, although consumption and PCE will be released on the day the meeting begins.

 

The homeownership rate fell in the second quarter, falling to 64.1% from 64.2% in the previous quarter. This rate of 64% was more or less the norm prior to the big homeownership push from the government in the mid 90s. It topped 69% during the bubble years and then fell below 63% during the bust. The rental vacancy rate was flat at 6.8%, which again is consistent with historical norms. It is an interesting series the vacancy rate was quite low during the high interest rate 1970s and quite high during the bubble years.

 

vacancy rate

18 Responses

  1. I am struck by the Atlanta Fed’s forecast of 1.3% for Q2, and also the Fed’s March forecast for 2.1% GDP growth in 2019 (revised down from 2.3%). They have been way LOW in their forecasts during the Trump admin and were way HIGH during the obama admin.

    Lesson: even the Fed lets partisanship slip into their analyses. They all thought that the tax cut was nothing more than a sugar high and have steadfastly ignored what happens when you have a government that sands off the worst of the regulatory burden.

    I find it interesting that strategists from the big investment banks are echoing that but, it could be that either (a) they don’t want to be outliers or (b) they don’t want to piss off the left, which will definitely punish anything that smacks of pro-Trump views.

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    • I suspect the amount of money wealthy progressives control, and their monopoly on using their media dominance to make people villains, informs the big investment banks decisions.

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  2. Just peeked at PL… They are still all-in for impeachment.

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  3. Peggy Noonan’s column today says a lot of what I have been thinking about the SJW left:

    So here is our parallel, our hiccup. I thought of all this this week because I’ve been thinking about the language and behavioral directives that have been coming at us from the social and sexual justice warriors who are renaming things and attempting to control the language in America.

    There is the latest speech guide from the academy, the Inclusive Communications Task Force at Colorado State University. Don’t call people “American,” it directs: “This erases other cultures.” Don’t say a person is mad or a lunatic, call him “surprising/wild” or “sad.” “Eskimo,” “freshman” and “illegal alien” are out. “You guys” should be replaced by “all/folks.” Don’t say “male” or “female”; say “man,” “woman” or “gender non-binary.”

    In one way it’s the nonsense we’ve all grown used to, but it should be said that there’s an aspect of self-infatuation, of arrogance, in telling people they must reorder the common language to suit your ideological preferences. There is something mad in thinking you should control the names of things. Or perhaps I mean surprising/wild.

    I see in it a spirit similar to that of the Terror. There is a tone of, “I am your moral teacher. Because you are incapable of sensitivity, I will help you, dumb farmer. I will start with the language you speak.”

    An odd thing is they always insist they’re doing this in the name of kindness and large-spiritedness. And yet, have you ever met them? They’re not individually kind or large-spirited. They’re more like messianic schoolmasters.

    https://www.wsj.com/articles/what-were-robespierres-pronouns-11564095088

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    • Love this comment:

      I’m watching Joy on the Rachel Maddow show and the guests are bringing out some of the extent of the interference. It’s not just elections. The Russians have all kinds of info on citizens, like SS numbers, driver’s license numbers, etc., all from hacking state registration rolls. Even if they can’t directly affect an election, they can steal the identities of citizens and do all kinds of mischief.

      A: So can every other criminal in every other country.

      B: Also, love the conflation of Russian cyber-mobsters and the Russian government.

      C: I don’t think there’s an serious evidence of state hacking of voter registration rolls. Russian criminals or gangsters who (like many others) try to hack everything might have gotten some rolls in some states/districts, but this does not seem particularly meaningful to me.

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      • I’m watching Joy on the Rachel Maddow show and the guests are bringing out some of the extent of the interference. It’s not just elections. The Russians have all kinds of info on citizens, like SS numbers, driver’s license numbers, etc., all from hacking state registration rolls. Even if they can’t directly affect an election, they can steal the identities of citizens and do all kinds of mischief.

        Don’t tell them about the Chinese/OPM hacking.

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  4. Uh oh.

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  5. If this is true I’d actually consider voting for Trump.

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    • Not cool? Not cool.

      Cripes on a cracker, f*** off, HuffPo.

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    • OMG people are such idiots.


      1. Slavery was legal. Black people were enslaved.

      Not in the constitution.


      2. Enslaved Africans were considered to be three-fifths of a person.

      A compromise designed to limit the power of slave-holding states that helped lead to the end of slavery.


      3. Only white people were considered to be people.

      Not in the constitution.


      4. Only white men who owned property could vote.

      Also not in the constitution.


      5. LGBT couples couldn’t get married.

      Again, actually not proscribed by the constitution. Does anybody HuffPo understand what a constitution is or how it works? Could any of them actually quote the three-fifths clause? Or explain its history?

      I’m convinced the only reason Trump won is a lot of these people couldn’t figure out when election day was or how to get to the polls or that you don’t vote for the president by texting HILLARY FOR PREZ to the American Idol vote number.

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