2016: Annual Real GDP Growing 1.9%
Q4: 2.5% (says NY Fed)
Q3: 3.2%
Q2: 1.4%
Q1: 0.9%
U.S. Economy, Growth in Decline Since 1981
Nominal GDP growth in the U.S. has been in sharp decline since the early 1980s. Economic growth without inflation adjustments; 14% in 1981, 7% in 2005 to 2.8% in 2016. Market’s hope President elect Trump can change this decay.
Q3 Real GDP was revised higher to 3.2% q/q with real final sales now 2.7% vs. 2.3% vs. the advance estimate. This points to decently strong momentum. However, given the move in the Dollar and interest rates since Q3, Q4 will likely not be as strong.
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The increase in GDP was largely due to the increase in consumer spending. Much of this spending was in the household services sector, notably on housing and utilities. The upward revision was heavily weighted by increase in consumer spending.
Don’t miss our next trade idea. Get on the Bear Traps Report Today, click hereExports of goods was pretty strong. However considering the Dollar strength and the EM weakness that has ensued, exports will taper off. Exports have been a large part of the GDP uptick since Q2, a reversion in a later revision or Q4 is likely. This will take the headline number back below 3%.
The recent rip in the Dollar since the election will put tremendous pressure on U.S. exports in the coming months. Over 40% of the earnings U.S. companies in the S&P 500 receive, come from overseas.
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Not all was positive, housing investment and state and local government spending declined.
Tighter financial conditions that have developed since the election will certainly weigh on growth in the coming quarters.
Overall we are in a similar state. An acceleration in private inventory investment, exports and federal government spending along with smaller decreases in state/local government spending and a deceleration in nonresidential fixed investment.
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