Economic Insights - March 2018

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First Quarter 2018 GDP estimates from the Atlanta Fed GDPNow models are running about 3.0 percent as of this writing. And that’s a big down-shift from the 5 percent real annualized growth rate GDPNow forecast in early February.

Nevertheless, the expansion still looks strong.

At the end of February, the Conference Board’s Consumer Confidence Index rose to 130.8, up from 124.3 in January. Consumers don’t seem to be bothered by stock market volatility that rose in mid-February.

Consumers grew more positive about both their present situation and about their expectations for the future. The Conference Board’s Present Situation Index increased from 154.7 to 162.4, while the Expectations Index improved from 104.0 last month to 109.7. That’s the index’s highest reading since November 2000! Economists had expected a much more modest rise.

Consumers’ assessment of the labor market is now very favorable. Consumers saying jobs are “plentiful” increased from 37.2 percent to 39.4 percent, while those claiming jobs are “hard to get” decreased from 16.3 percent to 14.7 percent.

Meanwhile, the U.S. Composite Output Index rolled in at 55.9 in February up from 53.8 in January; that’s a 27-month high! The Manufacturing component rose 0.4 points to 55.9; that’s a 40-month high!  And, the Services Business Activity component was reported at 55.9, up from 53.3 in January; that’s a 6-month high.

Chris Williamson, Chief Business Economist at IHS Markit says, “Business activity growth accelerated markedly in February, suggesting the economy is growing at its fastest pace for over two years. The upbeat February PMI surveys are indicative of GDP rising at an annualized rate of 3.0 percent. Even faster growth is signaled for coming months. February saw the largest influx of new orders for almost three years, while business expectations about the year ahead jumped to the highest since May 2015.”

The Institute for Supply Management (or ISM) said its manufacturing index rose to 60.8 percent in February, up from 59.1 percent in January. That’s the highest level since May 2004!  Any reading above 50 percent indicates improving conditions.

More broadly, the Leading Economic Indicators from...

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