Economic growth beat expectations in the fourth quarter of 2016, growing at 2.1%, according to a new report. The original estimate placed the growth level at 1.9%.
The revised numbers can be attributed to an increase in personal consumption expenditures (PCE), says the Bureau of Economic Analysis (U.S. Department of Commerce). Consumption makes up close to 70% of GDP.
In 2016, the U.S. economy grew at the slowest rate (1.6%) in five years. Last week, Treasury Secretary Steven Mnuchin discussed future GDP growth rates closer to 3%-3.5% in an interview with Axios.
According to a GDP tracking measure published by the Atlanta Fed, 2017 first quarter growth should come in at 1%; most Wall Street economists are forecasting growth closer to 2%. (U.S. GDP growth tops expectations, Myles Udland).
Growth of 2.1% since the recession’s end in 2009 represents the slowest expansion since the Great Depression (People’s United Wealth Management).
From the Bureau of Economic Analysis Report:
The increase in real GDP in 2016 reflected positive contributions from PCE, residential fixed investment, state and local government spending, exports, and federal government spending that were partly offset by negative contributions from private inventory investment and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP from 2015 to 2016 reflected downturns in private inventory investment and in nonresidential fixed investment and decelerations in PCE, in residential fixed investment, and in state and local government spending that were partly offset by a deceleration in imports and accelerations in federal government spending and in exports.
In other news, U.S. consumer confidence hit a 16 year high this March, according to the Conference Board’s monthly survey. The index increased to 125.6 which is the highest level since December of 2000.
The survey showed that American consumers have been more positive about economic conditions and the labor market (US consumer confidence explodes to the highest level since 2000, Akin Oyedele)
“Consumers also expressed much greater optimism regarding the short-term outlook for business, jobs and personal income prospects,” said the Conference Board’s Lynn Franco. “Thus, consumers feel current economic conditions have improved over the recent period, and their renewed optimism suggests the possibility of some upside to the prospects for economic growth in the coming months.”
We are now in the midst of the second longest bull market for U.S. stocks since 1928.
From People’s United Wealth Management:
While investors have seen their equity portfolios rise along with the roughly 315% return generated by the S&P 500 over the last eight years, they have been buffeted by worries over the Treasury debt downgrade in 2011, the Grexit and Brexit votes in Europe, and the seemingly endless turmoil in Washington. Concerns over the lurking demise of this bull market have haunted investors throughout its epic run even as household net worth soared by $38 trillion since the first quarter of 2009. Additionally, the post-election Trump rally of 11% in the S&P 500, as of this writing, has been driven by hopes for improved economic growth but the evidence of an actual economic acceleration is still in the offing (Quarterly Investment Review and Outlook).
Year-to-date, the S&P 500 has returned 5.46%. The Dow Jones Industrial average has grown 4.54% and the NASDAQ has come in with an impressive 9.87% YTD return.
Year-to-date, sectors with the strongest performance have been US Technology (12.42%),US Healthcare (8.91%), and US Consumer Cyclical (7.87%).
Poor performers include: US Energy (-6.71%), US Real Estate (1.12%) and US Financial Services (2.10%).
People’s United Wealth Management Quarterly Investment Review and Outlook (Second Quarter 2017)