There may be growing doubts as to the staying power of the current economic recovery in some circles, but the data that has come from the Conference Board of late has been very solid. For the fourth straight month, there was an improvement in this data. Now the index is sitting at 126.9, 0.3% higher than it was the month before.
The index is one of the more comprehensive looks at the U.S. economy as it is essentially an index of indices with 10 components added together to paint a whole picture. There is an examination of factors such as initial claims for jobless benefits to track whether companies are hiring or firing, factory orders to get a feel for the demand that is presenting itself from the consumer, the performance of the S&P 500 to gauge what is happening in the markets and so on.
The other seven indicators include the average number of hours worked in manufacturing, manufacturer’s new orders in consumer goods and materials, the ISM index reading of new orders, nondefense capital goods orders, building permits for new private housing units, the Leading Credit Index, the interest rate spread between 10-year Treasury bonds and federal funds rate and the measure of consumer expectations for business conditions. There were reported improvements as far as the lagging indicators and the coincident index as well.
The assertion at the start of the year was that the economic growth we have seen was being driven by expectations. That has been true to some degree as there have been plenty of surveys and polls suggesting that the enthusiasm demonstrated by the business community and the consumer was rooted in the belief that a new regime would sweep through and accomplish everything from tax reform to deregulation to revamping health care and reworking trade. It soon became apparent that none of these moves would be simple or swift. That was expected to drag on people’s confidence. It may have to a degree, but there have been other factors that have helped people stay upbeat.
The economy relies on the consumer for some 80% of its growth. For several reasons, the consumer is in a good mood and has started to extend that mood to action. For a few months at the start of the year, the surveys were not really matching up well with reality. Consumers said they were confident, but retail sales lagged. Now those retail numbers are up. Revisions to the old data show that there was more activity in the retail sector than had been noted before. There is even evidence that older Millennials are starting to emulate their elders as they begin their families and buy homes and all the other things that having children demand.
-Chris Kuehl, Ph.D., NACM Economist