Blog / Economic Commentary

  • Weekly Economic Monitor -- What Does the 1Q21 Data Tell Us

    By: Scott J. Brown, PH.D., Raymond James

    What Does the 1Q21 Data Tell Us About the Rest of the Year? – The Bureau of Economic Analysis reported that Gross Domestic Product (GDP) rose at a 6.4% annual rate in the advance estimate for the first quarter. However, that understates the economy’s strength. Private Domestic Final Purchases, a better measure of underlying domestic demand, rose at a 10.6% pace. Looking at the various components tells a story, one that ought to lead to reversals in some areas and strength in others. While many have obsessed about temporary inflation pressures from tight supply chains, the amount of slack in the labor market is potentially a bigger concern to the outlooks for growth and inflation.

    This Week – In a typical (pre-pandemic) April, the economy would add a little over one million jobs prior to seasonal adjustment. We should easily surpass that this April, but seasonal adjustment can be tricky. The unemployment rate is likely to edge lower, despite an expected pickup in labor force participation. Keep an eye on the employment/ population ratio. The April ISM surveys should be consistent with a strengthening economy.

  • Weekly Economic Monitor -- Trade, the Dollar, and Inflation

    By: Scott J. Brown, PH.D., Raymond James

    Trade, the Dollar, and Inflation – The advance estimate of 1Q21 GDP growth is expected to show negative contributions from net exports and the change in inventories. Private Domestic Final Purchases (consumer spending, business fixed, investment, residential fixed investment), a better measure of underlying domestic demand, should be a lot stronger. All else equal, a wider trade deficit puts downward pressure on the dollar, but while the trade-weighted dollar has risen relative to the end of last year, and by itself is not a significant issue in the inflation outlook. Prices of raw materials have risen, but that is likely to be transitory. Inflation in finished imported goods has remained moderate.

    This Week – The FOMC is widely expected to leave short-term interest rates and the monthly pace of asset purchases unchanged, while Chair Powell is unlikely to cover new ground in his press conference (but you never know). The advance estimate of 1Q21 GDP growth should be quite strong, likely held back by slower inventory growth and a wider trade deficit. Focus on Private Domestic Final Purchases (consumer spending, business fixed investment, and residential fixed investment), which should be a lot stronger. In his address to a joint session of Congress, President Biden will make his case for his infrastructure plan and spending priorities.

  • Weekly Economic Monitor -- This and That

    By: Scott J. Brown, PH.D., Raymond James

    This and That – The Bureau of Economic Analysis will report the advance estimate of 1Q21 GDP growth on April 28, the day after the Federal Open Market Committee meeting. There’s always a lot of uncertainty heading into the initial GDP estimate. We don’t have all the pieces of the puzzle. Recent economic data reports have generally been stronger than expected, which is encouraging, but the first quarter figures may not tell us much about what lies ahead.

    This Week – The economic calendar is relatively thin. March home sales figures (existing on Thursday, new on Friday) should rebound sharply from February’s weather-related weakness. The Conference Board’s Index of Leading Economic Indicators should jump higher (about +1.2%), with most components making positive contributions. The following week will be more eventful.

  • Weekly Economic Monitor -- Spending, Deficits, and Debt

    By: Scott J. Brown, PH.D., Raymond James

    Spending, Deficits, and Debt – On Monday, the Treasury Department is expected to report a March budget deficit of about $658 billion, bringing the 12-month total to nearly $4.1 trillion, about 19% of GDP. Proponents argue that the added spending, with more to come, will help to ensure the recovery. Critics charge that it’s overkill, likely to push aggregate demand ahead of supply. The debate over infrastructure spending will amplify these divisions.

    This Week – The March CPI report should show a year-over-year gain of around 2.4%, reflecting “base effects” (a rebound from the low figures of a year ago, as the CPI fell 0.3% in March 2020) – nothing to worry about. The March reports on retail sales, industrial production, and residential construction should each show a strong rebound from the effects of February’s bad weather.

  • Weekly Economic Monitor -- Jobs!

    By: Scott J. Brown, PH.D., Raymond James

    Jobs! – As the pandemic recedes and the economy reopens, we can expect strong job growth in the months ahead. The March figures were a start. We may soon see monthly gains in nonfarm payrolls of a million or more. However, as employment rebounds, labor market frictions are more likely to come into play, reflecting the scarring that has occurred over the last several months. It is unclear how much of this will lead to higher wage and price inflation, but pressures ought to be transitory.

    This Week – The economic data calendar is lighter. We could see some market reaction to the ISM Services Index (Monday). The report on producer prices (Friday) should continue to show inflation pressures at the earlier stages of production. For those interested in the global economic outlook, the IMF will revised its World Economic Outlook on Tuesday and Fed Chair Powell will speak on the topic on Thursday. FOMC minutes (Wednesday) aren’t likely to add much to the monetary policy outlook, but you never know (the financial press often pulls quotes out of context).