Economic Update - Q1 2018
WHAT WE'RE WATCHING
GLOBAL GROWTH: Concerted global growth has provided a foundation for equity gains over the past several years. Absent a significant exogenous shock, corporations – and their shareholders – should continue to benefit from this growth in 2018.
MONETARY POLICY: Central bank policy will become increasingly important in 2018, as the Federal Reserve and Bank of England tighten further, with the European Central Bank likely to follow suit.
RISKS: The second year of the Trump Presidency, a parliamentary impasse for Chancellor Angela Merkel in Germany, and building impatience with the pace of Brexit negotiations in the United Kingdom could create volatility.
U.S. GDP for the third quarter of 2017 was +3.2% quarter-over-quarter, compared to +3.1% in the second quarter. Driving growth were consumer spending, inventory investment, exports, and government spending at local, state, and federal levels.
Expectations are for growth of approximately +3.0% in the fourth quarter, based on increases in household income and spending, an improvement in residential fixed investment, and export growth.
Manufacturing remains firmly in expansionary territory, as the Institute for Supply Management’s manufacturing survey closed the year at 59.7. Underlying this continued strength were increases in new orders, export orders, and production.
Eurozone manufacturing, too, remains strong. In fact, Eurozone manufacturing PMI came in at 60.6 for December, the highest reading of all time, and data indicated strength across Europe, lending credence to hopes for sustained growth in 2018.
Consumer confidence fell modestly to close the year, as the Conference Board’s monthly survey for December showed a decline in consumer expectations. Still, the measure was the highest reading for a month of December since 2000 and showed that participants were positive about prospects for near-term income growth.
Employment remains strong, as the economy added an average of 170,000 jobs monthly during 2017. With the employment rate holding steady at 4.1%, wages should continue an upward trend.
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View Other Articles in this Issue:
- A Note from Our CIO – Q1 2018
- Market Review – Q1 2018
- Looking Ahead – Q1 2018
- Sector Spotlight - Are Dividends Still In? – Q1 2018
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