Economic Insights - August 2018

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The first estimate of second quarter 2018 GDP growth came in at 4.1 percent! That’s the best quarterly reading since 2014. And, based on recent experience, we expect that number to be revised up, perhaps to over 5 percent.

The Leading-Coincident Indicator ratio is still rising. As a chert in the printable issue of Business Briefings shows, that’s a very strong indicator that we are nowhere near entering a recession.

The Markit Flash Composite Output Index was at 55.9 in July. As Chris Williamson, Chief Business Economist at IHS Markit explains, “The July survey data indicate that the US economy sustained strong growth momentum after what looks to have been a solid second quarter; that represents a good start to the second half of 2018. Although down from June, the July flash PMI is in line with the average for the second quarter and indicative of the economy growing at an annualized rate of approximately 3 percent. Buoyant domestic demand helped the services sector maintain particularly impressive growth and has helped cushion the goods producing sector from wilting demand in export markets, despite goods export orders being down for a second successive month in July.

The Chicago PMI rose another 1.4 points to 65.5 in July after the 1.4 point uptick to 64.1 in June. It’s the fourth straight increase and is the best since January’s 65.7. The 3-month moving average rose to 64.1 from 61.5.

Construction spending fell 1.1 percent in June, though year-to-date levels of construction activity through June sharply exceeded estimates. That was due to upward revisions that reflected huge gains in the “home improvement” segment.

The final Markit manufacturing PMI for July eased fractionally to 55.3. Despite the dip to a 5-month low, the index is still at a robust level, and it’s up from 53.3 a year earlier. Chris Williamson, Chief Business Economist at IHS Markit says, “The U.S. manufacturing sector continued to expand in July but shows increasing signs of struggling against headwinds of supply shortages, rising prices and deteriorating exports. The latest survey showed output rising at a rate roughly equivalent to an annualized 1 percent pace of expansion, which is the weakest since late 2017....

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