Lindsey Report May ’17

The first quarter of 2017 is past, so now it is time to learn how things went. Regarding the overall economy, the Commerce Department reported that the economy continued its sluggish pace, growing at a meager .7% annual rate in the first quarter. Note, this GDP reading is considered the “advance” estimate, which will be revised two more times (BEA).

While this does represent a slowdown from the fourth quarter of 2016, it does not represent some dramatic shift or change from what we have experienced over the past several years. Reading some of the headlines and/or listening to a variety of commentators, one might get the impression that this meager, .7% growth rate was much worse. That would be inaccurate.

Here are some interesting headlines, regarding the “advance” GDP # from the last three years:

  • “Next to nothing: U.S. Economy only grows .5% in Q1 2016” (CNNMoney: 4.28.16)
  • “U.S. GDP Gained a Sluggish .2% in Q1 2015” (Forbes.com: 4.28.15)
  • “U.S. GDP Crawls in Q1 2014” (Wallstreetdaily.com: 4.30.14)
    • Advance GDP grew at .1% in Q1 2014 (BEA)

The fact is that this “advance” read on Q1 2017 GDP is the best figure since 2013, albeit all of the Q1 figures since 2013 were similarly unimpressive.

However, we have had some impressive news on the business earnings front. As of May 1st, about two-thirds of the companies comprising the S&P 500 have reported first quarter earnings. Over 77% have beaten their earnings estimates and the S&P 500 is currently tracking to a 13.6% year-over-year increase in earnings. Suffice it to say that these are very healthy and robust levels. (LPL Research: Daily Market Update: 5.1.2017)

I am a firm believer that when business earnings are strong, businesses tend to hire more, spend more and invest more. All of these things are good for the economy.   Even though we have a consumer driven economy, the consumer is ultimately driven by the source of their paycheck.

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