GDP surge in Q2 gives momentum to spending outlook

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A surge in Q2 GDP led by consumers provides momentum to consumer goods spending heading into the second half of 2018, although signs from other indicators—price inflation especially—provide some reason for caution.

The signs for the short term are distilled from the data storyboard below, which is based on economic sources and the consumer sentiment index created by MacroSavvy™ using data from Prosper Insights & Analytics™.

For a long-term outlook and forecast, see the post here.

  • GDP. Consumer gains were supported by investment spending (excluding inventory changes) that was sustained by businesses—although residential investment (i.e., the housing market) has turned flat. Exports also supported gains in advance of trade war effects that likely will become evident in Q3.
  • Jobs. Signs from job gains suggest the economic outlook is improving from a modest start to the year—despite trade and inflation-related threats. The job gains, however, remain skewed toward Western and some Southern states and metro markets. For more, see post here.
  • Prices. Consumer price inflation continues to slowly become a bigger threat—especially in the form of rising energy prices. Rising prices for services and food are adding to the threat. The threat likely will further squeeze consumer goods (i.e., retail), where prices continue to fall.
  • Confidence. Key to the outlook in the short term are Millennials, whose spending confidence remains on a strong upward trend. They have led consumers’ confidence to spend higher in recent months through July—with clothing and homegoods benefiting most. For more, see post here.
  • Retail & consumer goods. The sales trend in 2018 has improved as a result of a strong month of May and revisions to prior months as reported by the government. June stayed healthy, but uneven with weak spots at clothing, electronics, and big-box stores and gains skewed toward gasoline, autos, homegoods, drugs, and e-commerce.
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