Running On Empty - Baseless Economic Optimism
Written by Steven Hansen
According to participants in the Chicago Fed's annual Automotive Outlook Symposium, the nation's economic growth is forecasted to be near its long-term average this year and to strengthen somewhat in 2017.
Source: Chicago Fed Letter
The Fed should visit kindergarten classes to survey the pupils to get their economic opinions also.
According to the participants at the Automotive Outlook Symposium who at least should be conversant with auto sales and forecasting - 2016 light vehicle sales are predicted to be flat (unchanged from 2015) at 17.3 million units.
Wanna bet auto sales will be the same as last year? Does anyone look at data to understand the economy is slowing? Consider construction spending.
Construction spending has had a rough ride in the New Normal - spending almost half the time since the beginning of the Great Recession contracting year-over-year. Since 2012, it was acting like the good 'ole days with the average rate of growth around double digits.
Construction spending is an interesting data set as it is a good sized contributor to GDP - but its real value is that construction spending CAN BE a leading economic indicator depending on the reasons for economic slowing.
Few have noticed that the rate of growth has been trending down at a significant rate for most of 2016. The rate of year-over-year growth has dropped to 3.5 %.
Both residential and business construction spending are following the same trend lines - and in 2016 have been showing almost the same year-over-year growth rates (declining in lockstep). This is too bad as construction spending growth was one of the few bright spots fueling economic growth.
As always, I state there is little evidence the economy is recessing - but there is even less evidence the economy is improving. It provokes me when forecasters continue to anticipate economic improvement. The data indicates the U.S. economy is sitting on a narrow ledge, with growth on one side and recession on the other. Only a few nudges could push it either way. And hope is not a nudge.
Other Economic News this Week:
The Econintersect Economic Index for July 2016 continues marginally in contraction but insignificantly improved. The index is slightly above the lowest value since the end of the Great Recession. Although Econintersect does not buy into proposition that Brexit is bad for the global economy, the financial markets do - and their reaction may cause a recessionary dynamic. For those alive in 1973 will remember that the oil embargo triggered a recession. Global events do indeed impact the USA economy.
Bankruptcies this Week: Privately-held Essar Steel Minnesota (f/k/a Minnesota Steel Industries) and ESML Holdings