Much To Like About The Economy

Recent equity market volatility has raised the question about the health of the current economic expansion. I must confess it is difficult to find too much in the way of negative news. What is important about this is the fact that a recession does not seem to be around the corner in our view. William Delwiche, CMT, CFA of R.W. Baird noted in a recent commentary, "Bear markets are almost always associated with a recession. Given the latest economic data and the leading indicators that point to further growth, the odds of a recession are low". We would agree.

Following are just some of the favorable data points and charts.

  • U.S. consumer consumption continues to trend higher, running at a 4% annualized pace based on quarterly consumption reported in last Friday's advanced estimate of GDP. This is up from 3.05% in the second quarter. The consumer accounts for nearly 70% of economic growth and in and of itself, this is a positive input.

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  • Redbook reports weekly changes in same-store sales and last week the report shows same-store sales up 5.5% on a year over year basis. This now represents two consecutive weeks of a slowing pace in the same store sales results. However, Redbook notes the 5.5% growth rate remains one of the strongest in more than ten years. Recent strength in the performance of retail stocks provides some confirmation of this strong retail environment.

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  • Strength in the consumer is supported by a strong job market with job openings continuing to outpace job hires. Not shown is the fact job openings are up 18% on a year over year basis and exceed the number of individuals actually looking for jobs by nearly 1.2 million.

  • With a favorable job market and consumer spending continuing to grow, it should not be a surprise that consumer confidence is strong as well. The Conference Board's most recent Consumer Confidence Index report noted, 
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