More good news regarding the Port of Baltimore. A temporary 35-foot-deep channel opened this week, well ahead of schedule, allowing limited access for larger ships to public terminals. Meanwhile, salvage efforts at the F.S. Key Bridge and cleanup in the channel are progressing.
The travel impulse remains strong. Daily air passenger counts are still running nearly 6% above the same week in 2023 and 2019. Despite higher fares industry wide, this trend will likely persist. In fact, Delta Airlines said earlier this month that it projects record advance bookings for the summer.
Most of the activity-based indicators (slides 5 and 6) continued to gradually improve this past week.
- Inventories and net exports ding 1Q24 economic growth, though consumers still solid (slide 7).
- The Fed’s favorite inflation gauge’s pace held steady as did housing (slide 8).
- New home sales up 3 of past 4 months, prices pop to 6-month high (slide 9).
- New durable goods orders up in March as commercial aircraft orders return (slide 10).
- Big 4 indicators point toward continued growth for the U.S. economy (slide 11).
- Canal issues still hampering global trade (slide 12).
- Global shipping costs retreating, but still elevated due to canal issues (slide 13).
Most of the incoming economic data remains solid. That’s not to imply that everything is rosy – there are certainly challenges for businesses and individuals.
Yet, investors remain extremely skeptical, which is understandable given nearly two years of nonstop “a recession is coming!” messaging. Sorry, not sorry that we contributed to that recession messaging; pointing out risks is part of our job. Nonetheless, the mythical inflation boogeyman is alive and well, and living “rent free” in the heads of most investors. Some have truncated the famous quote by the late, great economist Milton Friedman to be “Inflation is always and everywhere.”
Indeed, prices have dramatically reset to higher levels following the pandemic for everything from food and everyday goods to homes and automobiles. Sadly, that’s not likely to change, which is typically what happens to prices.
But inflation is the rate of change for prices. By nearly every measure, inflation has moderated, especially relative to 2021, 2022, and 2023. Yet, the inflation boogeyman is seemingly creeping around every corner and hiding under every data point.
For instance, when the first quarter gross domestic product (GDP) data was released earlier this week, investors seized on the increase in the relate price index. Right on cue, news headlines began appearing asking about the threat of stagflation, which describes an economy that is experiencing high inflation, low economic growth, and high unemployment.
Flatly, the U.S. isn’t confronted with any of those issues. While inflation hasn’t returned to the extremely low pre-pandemic levels just yet, it isn’t high. Economic growth shows the economy isn’t weak. While it may be sluggish at times, growth isn’t low – it’s generally running at the pre-pandemic trend currently. And, if anything, unemployment is too low rather than too high. To wit, it has remained under 4% for 26 months (and counting) – the longest stretch since the late 1960s.
Yes, there is an ongoing risk of inflation running hotter; thus, we’ll concede that inflation isn’t an irrational fear on the part of investors. To be fair, though, our base case for nearly two years has been that inflation wouldn’t get all the way down to the extremely low pre-pandemic levels due in large part to the housing supply deficit.
Conversely, investors should accept that inflation – like most economic data and trends – doesn’t always move in a neat, straight line. It’s been a bumpy path, which will likely persist. By the way, this isn’t some failing on the part of the Federal Reserve (Fed). As we discussed here last week, the Fed doesn’t control prices, nor the factors of production in the economy. While it does heavily influence the cost of capital, the Fed doesn’t control lending, land, labor, or other resources.
We maintain our belief that inflation will moderate as the year progresses based on two factors. First, the gradual cooling of economic growth witnessed during the first quarter will continue to dampen demand and, in turn, inflation. Second, while housing supply isn’t going to be completely fixed anytime soon, it is improving. Within first quarter GDP, residential housing increased 13.9%, the most in two full years.
Hence, while inflation is still an issue, it’s not the ONLY issue. Furthermore, inflation isn’t intractable. Though the remedy is unpleasant, the Fed and central banks know how to deal with inflation – holding rates higher, albeit for a little while longer.
The U.S. economy remains resilient and should sidestep a recession. Most economic data continues to steadily improve. Yet, the cumulative impact of higher rates does weigh on economic growth. We maintain our view that the Fed will reduce rates in the summer.
FAQs
The seven BLS programs that produce Principal Federal Economic Indicators all publish national US data. These programs are: Current Population Survey, Current Employment Statistics, Consumer Price Index, Producer Price Indexes, International Price Indexes, Employment Cost Index, and Major Sector Productivity.
How to track the economy? ›
Some of the main indicators of the overall health of the economy are gross domestic product (GDP), inflation, unemployment, money supply, consumer spending, retail sales, and existing home sales.
What is the current state of the US economy? ›
How is the US economy doing? US gross domestic product (GDP) increased 1.9% in 2022 and another 2.5% in 2023. Year-over-year inflation — the rate at which consumer prices increase — was 3.1% in January 2023. The Federal Reserve raised interest rates seven times in 2022 and four times in 2023.
What is the best indicator of a good economy? ›
Gross Domestic Product (GDP), a widely used indicator, refers to the total gross value added by all resident producers in the economy. Growth in the economy is measured by the change in GDP at constant price.
How to tell if the economy is doing well? ›
The growth rate of real GDP is often used as an indicator of the general health of the economy. In broad terms, an increase in real GDP is interpreted as a sign that the economy is doing well.
What are 5 economic indicators of an economy? ›
Ahead of the State of the Union this week, this column highlights five key indicators that illustrate the United States' strong economic foundation: economic growth, nonfarm employment, the unemployment rate, manufacturing construction spending, and the number of new business applications.
Is the US in a recession right now? ›
Though the economy occasionally sputtered in 2022, it has certainly been resilient — and now, in the second quarter of 2024, the U.S. is still not currently in a recession, according to a traditional definition.
When was America's economy at its peak? ›
The most vigorous, sustained periods of growth, on the other hand, took place from early 1961 to mid-1969, with an expansion of 53% (5.1% a year), from mid-1991 to late 2000, at 43% (3.8% a year), and from late 1982 to mid-1990, at 37% (4% a year).
Are we in a great depression right now? ›
“The American economy is not in a silent depression. It's not even in a depression at all,” House said. “When we came into 2023, many economists thought we might slide into a recession over the course of the year, but growth in goods and services and in trade have all remained far stronger than we anticipated.”
Which state of USA has the strongest economy? ›
Overall, in the calendar year 2023, the United States' Nominal GDP at Current Prices totaled at $27.360 trillion, as compared to $25.744 trillion in 2022. The three U.S. states with the highest GDPs were California ($3.8 trillion), Texas ($2.56 trillion), and New York ($2.15 trillion).
US Inflation Rate is at 3.48%, compared to 3.15% last month and 4.98% last year. This is higher than the long term average of 3.28%.
Who has the best economy in the world? ›
The United States is the undisputed heavyweight when it comes to the economies of the world. America's gross domestic product in 2022 was more than 40% greater than that of China, the world No. 2. Even more striking, U.S. GDP was over five times that of the next two largest economies, Japan and Germany.
Is the economy recovering in the USA? ›
The expansion in economic activity in the recovery proved to be stronger and faster than initial projections, and by the end of 2023 job creation was well above and economic activity was slightly above their pre-pandemic projections.
What is the most reliable indicator of recession? ›
The Yield Curve as a Leading Indicator - FEDERAL RESERVE BANK of NEW YORK. This model uses the slope of the yield curve, or “term spread,” to calculate the probability of a recession in the United States twelve months ahead. Here, the term spread is defined as the difference between 10-year and 3-month Treasury rates.
What is the most accurate economic indicator? ›
Produced by the Bureau of Economic Analysis, GDP data is ranked as one of the three most influential economic measures that affect U.S. financial markets.
What are the 3 key economic indicators that the government relies on to measure our economy? ›
While there are many different economic indicators, specific pieces of data released by the government and non-profit organizations have become widely followed. Such indicators include but aren't limited to the Consumer Price Index (CPI), gross domestic product (GDP), or unemployment figures.
What are the five major statistics that measure the national economy? ›
This area of economics deals with the overall economy's output, or production, and its income. Five major statistics measure the national economy. These are gross domestic product, net domestic product, national income, per- sonal income, and disposable personal income.
What is a leading economic indicator What are the top 5? ›
Top Leading Indicators
The yield curve, durable goods orders, the stock market, manufacturing orders, and building permits are some of the best indicators to use when trying to determine where the economy is headed.
What are the macroeconomic indicators of the United States? ›
Macroeconomic Indicators - United States
The GDP (gross domestic product) in the United States is forecast to amount to €25.57tn in 2024. The consumer price index in the United States is expected to be 127.70 by 2024. The general government gross debt in the United States is expected to be 126.86% of GDP by 2024.
