Jack Dunn - Reclaiming Common Sense

Three Numbers to Watch


The are three numbers to watch with the release of the First Quarter Advance GDP Value this Friday: The Annualized GDP (Future based on one Quarter,) The Real GDP (same quarter growth, Q1 versus Q1) and the Real Annual GDP for the past year. The GDP data is a composite of seasonally adjusted data for Gross Private Domestic Investment (GPDI,) Personal Consumption Expenditures (PCE,) Gross Government Consumption Expenditures (GCE,) and the Import Export Data. We have received three months of MARTS retail data, three months of Inflation (CPI) data, three months of Government Outlay Data, Three months of New Construction data (a proxy for GPDI,) and only two months of Import/Export data. Here is what to expect.


Personal Consumption Expenditures are up Over First Quarter Last Year. The CPI data indicates that the non-seasonally adjusted inflation was 2.1%, 2.2% and 2.4% for January, February, and March of this year. The March CPI could have been reported at 2.1%. October, November, and December 12 month rates of inflation were 2.0%, 2.2% and 2.1%. Inflation should bump up both the same quarter and the annualized GDP data If you want to look at the MARTS Retail data, the seasonally adjusted data for January was reported higher than January 2017,  and the February and March Data was reported higher than February and March 2017. The first three months of retail, non-seasonally adjusted, were 1.392 trillion dollars compared to the first quarter sales of 1.328 trillion dollars during 2017. This is an increase of 4.82%. The seasonally adjusted data was up from 1.419 trillion dollars to 1.478 trillion dollars, or 4.12%. The fourth quarter is Christmas for the GDP, too. We saw 1.538 trillion in NSA sales and 1.474 trillion in SA sales. This means that the quarter to quarter "Annualized" data was down 9.53% while the SA annualized data was up 0.25%. we know that 2017 was the best retail sales year ever. The first quarter Retail sales was the best first quarter retail sales ever. Both annualized and Same quarter data should add to GDP.


Gross Private Domestic Investment should also rise. The GPDI is comprised of Non-residential Structures, Equipment, and Intellectual Property plus residential structures. Normally one of these components goes "negative" during the first quarter for the Table 1 data (annualized,) and during 2014, 2015, and 2016 Q1 the Table 8 contributions were all positive. Residential New Construction was up 12.8% quarter to quarter and up 9.0% for the same quarter data, as was reported yesterday in the new construction report.


Government Spending is Up. This data was reported in the New Construction report article, as well. Quarter to quarter spending was up over 15% and same quarter spending was up over 5%.


The Import Export Data is Incomplete and Mixed. The February Import-Export data showed that the Seasonally Adjusted data for January and February were higher for imports and exports, compared to January and Feb 2017. The seasonally adjusted data dropped for imports and exports from February 2017 to March 2017. The NSA import and export data both rose February to March.  Imports are up, seasonally adjusted, 8.55% over January and February 2017. Exports are up 6.30% for the same time period. The same data in non-seasonally adjusted form is up 6.75% for exports and 9.86% for imports. Last year fourth quarter SA Exports were $404.498 billion and imports were $611.015 billion.So far we are at $270 billion and $419 billion. If we grow imports and exports at the same rate as we did last March then both imports and exports will be up quarter to quarter and same quarter to same quarter.


The Table 7 Annual GDP could be revised higher. The true rate of growth is the end of the year, 12 month, growth number. That number never reached 3% while President Obama was in office. It did reach 2.9% during 2015 after a series of revisions. The Retail sales have been revised higher. If the 2017 growth is revised higher that will "borrow growth" from 2018, something that was done with the Current Employment Statistics data with the release of the January 2018 Jobs Report. Watch the revisions.


Inflation, personal consumption expenditures, should be up quarter to quarter and Same quarter to Same quarter. The same is true for Gross Private Domestic Investments, Government Spending, and possibly imports and exports. The import Export data is incomplete and still looks really good. Seasonal factors matter. There are no seasonally adjusted revenue data available through the monthly Treasury reports. The seasonally adjusted Retail data is better this quarter than first quarter 2017 (up 4.12%) and better than the seasonally adjusted data for the fourth quarter of 2017 (0.25%.)  Up, plus, up, plus up, plus up should mean that both the annualized and the same quarter GDP numbers should be reported over 2%. The Table 1 annualized GDP could be as high as 2.7%-2.8%. Expect a value over 2%, and remember that five of eight first quarters had annualized rates of GDP under 2% while President Obama was in office, with two being negative and one being under 1.0%. The same could be said regarding the Table 8 "Real" same quarter to same quarter growth. Expect that number to exceed last quarter's Table 8 GDP value.


It's the economy.