So much for that economic forecast

[muwarrior69]

In my development of about 80 homes 15 are building backyard decks and another 10 are building pools. I guess with high energy costs air travel is expensive so some are just staying home rather than go on vacation. Most families have kids so they rather spend the money on the pool or deck which they can enjoy summer after summer than one vacation. So though the economy is not great its not that bad either if folks can spend on home improvements.

[MU82]

In my development of about 80 homes 15 are building backyard decks and another 10 are building pools. I guess with high energy costs air travel is expensive so some are just staying home rather than go on vacation. Most families have kids so they rather spend the money on the pool or deck which they can enjoy summer after summer than one vacation. So though the economy is not great its not that bad either if folks can spend on home improvements.

Folks are spending on everything. Airplanes are packed. Restaurants are jammed. Hotels are charging a king's ransom again. People are buying stuff big and small. In the last 6 weeks, I've been to Asheville, Chicago and suburban Seattle -- all were hopping. Here in Charlotte, one of America's fastest-growing metro areas, money floweth.

[TSmith34, Inc.]

TSmith
What do you consider people leaving their house and doing? Chipolte barely met top line numbers and admitted that increased sales price offset rising costs. In addition, if people are leaving their houses to do things that is usually when other segments of consumer goods rise rapidly. Going on a vacation people usually will buy new clothes or shoes, getting involved in a new hobby and people buy things associated with that hobby. There is not a consumer good item that AMZN is not involved in, and they should be protected for any change in consumer sentiment.

The big boys have more than offset their rising costs and still are struggling to hit top line numbers. I do supply chain management for a living and feel I have solid understanding of the marketplace. The consumers are still spending money and buying product, just not the same amount of units. To be honest, I think the AMZN and Netflix comparison shows a complete lack of understanding of the makeup of the US consumer.

I think there is a big storm brewing and I am not going to have my head in the sand. Consumer good inflation is real and going to get worse. As I noted in earlier post, APPL and AMZN can confidently state unsure guidance without hurting their brands. 99.9% of the consumer goods marketplace are not in the same position to sound alarms. Now, I hope I am wrong for obvious reasons, but being involved in all aspects of retail for over 30 years has taught me a little bit about the US consumer and I am not sounding an alarm for the sake of sounding an alarm.

I am saying that AMZN and NFLX are in the same boat post-COVID. Consider that their year ago comparison was as the Delta variant was reeking havoc across the U.S. People were staying home and hunkering down, at least in comparison to 1Q22.

Now, people are out, spending directly rather than ordering through Amazon to the same degree. Travel has skyrocketed, as have hotels, rentals, etc. People are spending less from their couches, and top line price increases are not going to make up for the volume decreases.

I think AMZN will have an easier recovery once their YoY comparisons normalize. Supply chain will still be an issue, but I believe they can continue to other segments until that works itself out. NFLX I think will have a bit more difficult road due to the level of capital that has flocked to streaming. It's really difficult to create content at a price consumers are willing to pay given how many streaming options they have out there. I'm still tempted to buy some NFLX here as I think in the long run they will be fine as the clear leader, but I would guess some of these streaming services are in for a world of hurt.

[MU82]

Four companies that have had tremendous earnings reports in the last week (and huge stock price gains in response to those reports):

Visa (V), Mastercard (MA), Discover (DFS), American Express (AXP).

Americans are spending as if we don't have a care in the world.

Maybe we're all dumb and we should have a bazillion cares, but we aren't spending as if we're concerned about the economy.

[Goose]

82

I think maybe you are missing my point. If costs are up 10% and top line numbers are close to the same YOY, we spending the same money and buying less amount of goods, which is not a good indicator for the economy.

Consumers spending money is not in question, but what we are getting for that money and how we are paying for it is my concern. The high increase in credit card debt over the past several months is also something to keep an eye on.

Much like politics, I do not think Wall Street is an indicator or is in touch with the masses. Record savings in the USA is great, but who is holding the savings? I believe the high credit card use is a troubling sign and possibly a reflection on how Main Street America is faring.

Basically, like many on here, I love the stock market and economy as a whole and love studying it. That said, I try hard to digest what the numbers mean based off real life experiences, rather than just talking numbers. I think we are in for rough sledding ahead and hope I am wrong.

[MU82]

82

I think maybe you are missing my point. If costs are up 10% and top line numbers are close to the same YOY, we spending the same money and buying less amount of goods, which is not a good indicator for the economy.

Consumers spending money is not in question, but what we are getting for that money and how we are paying for it is my concern. The high increase in credit card debt over the past several months is also something to keep an eye on.

Much like politics, I do not think Wall Street is an indicator or is in touch with the masses. Record savings in the USA is great, but who is holding the savings? I believe the high credit card use is a troubling sign and possibly a reflection on how Main Street America is faring.

Basically, like many on here, I love the stock market and economy as a whole and love studying it. That said, I try hard to digest what the numbers mean based off real life experiences, rather than just talking numbers. I think we are in for rough sledding ahead and hope I am wrong.

You might be right, Goose; we'll see soon enough. You talk about real-life experiences, such as your belief that NYC was unusually "quiet." I happened to be in Chicago while you were in NYC, and I thought the North Side was hopping. I don't know that either of our experiences is much of an economic signal, but maybe yours was and mine wasn't.

I'm not going to debate your other points, partly because I agree with some of them and partly because I don't want either of our political biases to enter in.

For information on the state of the economy, I generally stick with reporting by trusted news sources. I'll leave you with Reuters' article on the situation, which I think does a nice job of presenting all the angles:

WASHINGTON, April 28 (Reuters) - The U.S. economy unexpectedly contracted in the first quarter amid a resurgence in COVID-19 cases and drop in pandemic relief money from the government, but the decline in output is misleading as domestic demand remained strong.

The first decrease in gross domestic product since the short and sharp pandemic recession nearly two years ago, reported by the Commerce Department on Thursday, was mostly driven by a wider trade deficit as imports surged, and a slowdown in the pace of inventory accumulation.

A measure of domestic demand accelerated from the fourth quarter's rate, allaying fears of either stagflation or a recession. The Federal Reserve is expected to hike interest rates by 50 basis points next Wednesday. The U.S. central bank raised its policy interest rate by 25 basis points in March, and is soon likely to start trimming its asset holdings.

"The economy is still showing some resilience, but the first-quarter GDP report signals the start of more moderate growth this year and next, largely in response to higher interest rates," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "Despite the contraction, the Fed has little choice but to hike aggressively in May to corral inflation."

Gross domestic product fell at a 1.4% annualized rate last quarter, the government said in its advance GDP estimate. The economy grew at a robust 6.9% pace in the fourth quarter. Economists polled by Reuters had forecast GDP growth rising at a 1.1% rate. Estimates ranged from as low as a 1.4% rate of contraction to as high as a 2.6% growth pace.

The economy also took a hit from supply-chain challenges, worker shortages and rampant inflation. Last quarter's decline is a head fake as GDP remains 2.8% above its level in the fourth quarter of 2019 and the economy grew 3.6% on a year-on-year basis. Further, 1.7 million jobs were created in the first quarter and manufacturing output grew at a 5% pace.

"It is nonsense that real GDP declined," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

But the mismatch hints at weaker productivity last quarter.

Front-loading by businesses fearful of shortages because of the Russia-Ukraine war contributed to a surge in imports. Exports tumbled, leading to a sharp widening of the trade deficit, which chopped 3.20 percentage points from GDP growth, the most since the third quarter of 2020. Trade has now been a drag on growth for seven straight quarters.

Businesses have turned to imports to satisfy demand, with local manufacturers lacking the capacity to boost production. Business inventories increased at a $158.7 billion pace, slowing from the robust $193.2 billion rate in the October-December quarter. Inventory investment cut 0.84 percentage point from GDP growth.

Stocks on Wall Street were higher as investors shrugged of the drop in GDP. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity picked up at a rate of 2.7% from the fourth-quarter's 2.5% pace, despite taking a hit from the winter wave of coronavirus cases, driven by the Omicron variant.

The loss of pandemic money to households from the government was partially offset by rising wages amid a tightening labor market. Government spending fell for a second straight quarter.

Strengthening labor market conditions were reinforced by a separate report from the Labor Department on Thursday showing initial claims for state unemployment benefits fell 5,000 to a seasonally adjusted 180,000 for the week ended April 23. With a near record 11.3 million job openings at the end of February, employers are desperately hanging on to their workers.

Even with food and gasoline prices soaring, there is no sign yet of consumers pulling back. The government's measure of inflation in the economy surged at a 7.8% rate, the fastest in 41 years, after increasing at a 7.0% pace in the fourth quarter. Inflation by all measures has overshot the Fed's 2% target.

At least $2 trillion in excess savings accumulated during the pandemic are providing a cushion against inflation.

Workers shortages saw businesses boosting investment, with spending on equipment increasing at a 15.3% rate last quarter. They mostly bought computers and industrial machinery.

That combined with solid consumer spending to hoist final sales to private domestic purchasers at a 3.7% rate. This measure of domestic demand, which excludes trade, inventories and government spending, increased at a 2.6% rate in the fourth-quarter. Final sales to private domestic purchasers account for roughly 85% of aggregate spending.

The housing market notched another second straight quarterly gain, but with the 30-year fixed mortgage shooting above 5%, the outlook is uncertain.

While concerns remain that the Fed could aggressively tighten monetary policy and tip the economy into recession, most economists are not convinced, pointing to the strong domestic demand and signs that inflation may have peaked.

Consumer spending last quarter was driven by services. The shift in demand from goods is likely to help ease pressure on supply chains, though the coronavirus-related lockdowns in China pose a risk.

"The U.S. economy is not anywhere close to recession," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. "Underlying demand remains strong, and the labor market is in excellent shape. Growth will resume in the second quarter."

[Uncle Rico]

You might be right, Goose; we'll see soon enough. You talk about real-life experiences, such as your belief that NYC was unusually "quiet." I happened to be in Chicago while you were in NYC, and I thought the North Side was hopping. I don't know that either of our experiences is much of an economic signal, but maybe yours was and mine wasn't.

I'm not going to debate your other points, partly because I agree with some of them and partly because I don't want either of our political biases to enter in.

For information on the state of the economy, I generally stick with reporting by trusted news sources. I'll leave you with Reuters' article on the situation, which I think does a nice job of presenting all the angles:

WASHINGTON, April 28 (Reuters) - The U.S. economy unexpectedly contracted in the first quarter amid a resurgence in COVID-19 cases and drop in pandemic relief money from the government, but the decline in output is misleading as domestic demand remained strong.

The first decrease in gross domestic product since the short and sharp pandemic recession nearly two years ago, reported by the Commerce Department on Thursday, was mostly driven by a wider trade deficit as imports surged, and a slowdown in the pace of inventory accumulation.

A measure of domestic demand accelerated from the fourth quarter's rate, allaying fears of either stagflation or a recession. The Federal Reserve is expected to hike interest rates by 50 basis points next Wednesday. The U.S. central bank raised its policy interest rate by 25 basis points in March, and is soon likely to start trimming its asset holdings.

"The economy is still showing some resilience, but the first-quarter GDP report signals the start of more moderate growth this year and next, largely in response to higher interest rates," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "Despite the contraction, the Fed has little choice but to hike aggressively in May to corral inflation."

Gross domestic product fell at a 1.4% annualized rate last quarter, the government said in its advance GDP estimate. The economy grew at a robust 6.9% pace in the fourth quarter. Economists polled by Reuters had forecast GDP growth rising at a 1.1% rate. Estimates ranged from as low as a 1.4% rate of contraction to as high as a 2.6% growth pace.

The economy also took a hit from supply-chain challenges, worker shortages and rampant inflation. Last quarter's decline is a head fake as GDP remains 2.8% above its level in the fourth quarter of 2019 and the economy grew 3.6% on a year-on-year basis. Further, 1.7 million jobs were created in the first quarter and manufacturing output grew at a 5% pace.

"It is nonsense that real GDP declined," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

But the mismatch hints at weaker productivity last quarter.

Front-loading by businesses fearful of shortages because of the Russia-Ukraine war contributed to a surge in imports. Exports tumbled, leading to a sharp widening of the trade deficit, which chopped 3.20 percentage points from GDP growth, the most since the third quarter of 2020. Trade has now been a drag on growth for seven straight quarters.

Businesses have turned to imports to satisfy demand, with local manufacturers lacking the capacity to boost production. Business inventories increased at a $158.7 billion pace, slowing from the robust $193.2 billion rate in the October-December quarter. Inventory investment cut 0.84 percentage point from GDP growth.

Stocks on Wall Street were higher as investors shrugged of the drop in GDP. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity picked up at a rate of 2.7% from the fourth-quarter's 2.5% pace, despite taking a hit from the winter wave of coronavirus cases, driven by the Omicron variant.

The loss of pandemic money to households from the government was partially offset by rising wages amid a tightening labor market. Government spending fell for a second straight quarter.

Strengthening labor market conditions were reinforced by a separate report from the Labor Department on Thursday showing initial claims for state unemployment benefits fell 5,000 to a seasonally adjusted 180,000 for the week ended April 23. With a near record 11.3 million job openings at the end of February, employers are desperately hanging on to their workers.

Even with food and gasoline prices soaring, there is no sign yet of consumers pulling back. The government's measure of inflation in the economy surged at a 7.8% rate, the fastest in 41 years, after increasing at a 7.0% pace in the fourth quarter. Inflation by all measures has overshot the Fed's 2% target.

At least $2 trillion in excess savings accumulated during the pandemic are providing a cushion against inflation.

Workers shortages saw businesses boosting investment, with spending on equipment increasing at a 15.3% rate last quarter. They mostly bought computers and industrial machinery.

That combined with solid consumer spending to hoist final sales to private domestic purchasers at a 3.7% rate. This measure of domestic demand, which excludes trade, inventories and government spending, increased at a 2.6% rate in the fourth-quarter. Final sales to private domestic purchasers account for roughly 85% of aggregate spending.

The housing market notched another second straight quarterly gain, but with the 30-year fixed mortgage shooting above 5%, the outlook is uncertain.

While concerns remain that the Fed could aggressively tighten monetary policy and tip the economy into recession, most economists are not convinced, pointing to the strong domestic demand and signs that inflation may have peaked.

Consumer spending last quarter was driven by services. The shift in demand from goods is likely to help ease pressure on supply chains, though the coronavirus-related lockdowns in China pose a risk.

"The U.S. economy is not anywhere close to recession," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. "Underlying demand remains strong, and the labor market is in excellent shape. Growth will resume in the second quarter."

I’m not reading that.

[Hards Alumni]

I’m not reading that.

Yeah same, the link would suffice.

[Goose]

82

My Dad, who relied on a strong retail environment for business, and used to go walk the malls after work and on weekends to get the pulse of the consumer. His main barometer was not the people in the stores, but the people carrying bags. People out and about is great and if they are spending money we have nothing to worry about.

I might be in the minority, but I have pulled in my horns. I passed on Bucks playoff tickets for the first two rounds and I may go the Deer District if the weather ever gets better. I would say that my desire to overpay for going out has diminished a great deal over the past six months.

As for your comment on political bias, I have zero on this topic. I believe every President dating back to Bill Clinton made a major mistake in the handling of China. I have no idea what economic issues we may or may not have had without allowing China to control our supply chain, but I have a pretty good idea of how China is affecting our lives today. There has been complete malpractice conducted by our leaders for nearly thirty years on this front. For reference, I think global trade is essential, but I do not think we have fair global trade with China and that is the problem.

[Hards Alumni]

82

My Dad, who relied on a strong retail environment for business, and used to go walk the malls after work and on weekends to get the pulse of the consumer. His main barometer was not the people in the stores, but the people carrying bags. People out and about is great and if they are spending money we have nothing to worry about.

I might be in the minority, but I have pulled in my horns. I passed on Bucks playoff tickets for the first two rounds and I may go the Deer District if the weather ever gets better. I would say that my desire to overpay for going out has diminished a great deal over the past six months.

As for your comment on political bias, I have zero on this topic. I believe every President dating back to Bill Clinton made a major mistake in the handling of China. I have no idea what economic issues we may or may not have had without allowing China to control our supply chain, but I have a pretty good idea of how China is affecting our lives today. There has been complete malpractice conducted by our leaders for nearly thirty years on this front. For reference, I think global trade is essential, but I do not think we have fair global trade with China and that is the problem.

I think you've been very fair with your political bias here.  For what its worth.  Also, I generally agree with most of your assessments here.

China's grip over our supply chain is becoming a national security issue.  Unfortunately, our desire for cheap products has made us dependent on China.  I'm not sure we can legislate our way out of this.  As a species, we are slow to react and we often only act when our lives or finances are at risk.  I understand that you get this as well.  It's the same issue we face with our environment.  We see and acknowledge the problem, but we are unable to make real change to fix the problem.  Every year, plastic consumption increases and we recycle less... but as long as we throw the plastic in the green bin and it leaves our driveway once every week or two, we won't change.  Sorry, I'm getting off topic now.  But I think I've made my point.  We won't abandon our dependence on China's production and supply chains until it becomes financially untenable or we face an existential crisis (war).

[Lennys Tap]

Exactly.  Our recovery has been far better than most of the world.

Our recovery has been better than the rest of the world because of states (like Florida) and governors (like DeSantis) who kept their economies open. Don’t think President Biden and his supporters deserve credit for that.

[MU Fan in Connecticut]

I just returned after a week and half in France and Italy.  The airports were as full as I can remember pre-pandemic, the airline was asking for volunteers to be bumped on my flight out, and all the places I visited in France & Italy were mobbed with tourists.   Hotels had limited reservations. 

The airfare prices were surprisingly reasonable too, as were the hotel costs. 

[Goose]

Hards

I say it all of the time, I would trust Tim Cook and Apple's intel on the ground more than our government's handle on the situation. I say that 70% in jest and 30% that it might be true. That said, if I wanted the truth on day to day activity in China, give my Tim Cook's guys as my source.

[Hards Alumni]

Our recovery has been better than the rest of the world because of states (like Florida) and governors (like DeSantis) who kept their economies open. Don’t think President Biden and his supporters deserve credit for that.

Lol

The only things manufactured in Florida are lies.

[Herman Cain]

Folks are spending on everything. Airplanes are packed. Restaurants are jammed. Hotels are charging a king's ransom again. People are buying stuff big and small. In the last 6 weeks, I've been to Asheville, Chicago and suburban Seattle -- all were hopping. Here in Charlotte, one of America's fastest-growing metro areas, money floweth.

I learned a long time ago, that circumstances like you describe above can happen at the same time the economy is contracting.

As long as people have jobs they feel secure in they are going to spend .

During the Great Recession places like The Cheesecake Factory had lines to get a table .

The supply chain issues we are experiencing limits businesses ability to expand . So in certain sectors there is a supply demand imbalance .

Our Company is trying to grow but in some cases it will take a year to get everything we need to build our new faculties . So we can’t take in many new accounts , our competitors are roughly the same position.

[Goose]

Herman
We have a client with a fantastic product and has 500% over the past two years and has to discontinue digital marketing because he so far behind in deliveries. This is great run company and a better product and he cannot solicit new customers currently. They have a niche product that is needed for special needs children and I hope we can fix their mess. IMO, his situation is not a positive for the economy.

[4everwarriors]

Lol

The only things manufactured in Florida are lies.

How do y'all explain the GDP declining 1.4% in the 1st Q of this year? Its called a contracted economy. I blame Putin, hey?

[pacearrow02]

Lol

The only things manufactured in Florida are lies.

Ain’t that the truth.

https://nypost.com/2021/05/13/how-rebekah-jones-peddled-lies-about-florida-covid-19-deaths/amp/

[Hards Alumni]

Ain’t that the truth.

https://nypost.com/2021/05/13/how-rebekah-jones-peddled-lies-about-florida-covid-19-deaths/amp/

Ah, the New York Post, a periodical of note!  And an opinion from a conservative from Florida as well!

Great post, as usual, bud.

[Hards Alumni]

How do y'all explain the GDP declining 1.4% in the 1st Q of this year? Its called a contracted economy. I blame Putin, hey?

I don't need to.  The economists don't seem concerned, so I'm not either.

[Golden Avalanche]

Our recovery has been better than the rest of the world because of states (like Florida) and governors (like DeSantis) who kept their economies open. Don’t think President Biden and his supporters deserve credit for that.

Florida and Florida alone?

If not, can you provide the list of states you feel are also responsible for the recovery?

[Hards Alumni]

Florida and Florida alone?

If not, can you provide the list of states you feel are also responsible for the recovery?

We were all locked up while Florida was the only place 'open for business'.

In their heads, at least.

[Pakuni]

Our recovery has been better than the rest of the world because of states (like Florida) and governors (like DeSantis) who kept their economies open. Don’t think President Biden and his supporters deserve credit for that.

California GDP 2021 = +9.5%
Florida GDP 2021 = +7.5%

Wisconsin = +6.1%
Missouri = +4.4%

Oregon = +9.8%
Arizona = +6.2%

Please explain these numbers, in light of your theory that economic growth is directly tied to which states had tighter or looser COVID restrictions.

https://www.bea.gov/news/2022/gross-domestic-product-state-4th-quarter-2021-and-year-2021-preliminary

[Lennys Tap]

Florida and Florida alone?

If not, can you provide the list of states you feel are also responsible for the recovery?

Other states did well also, but most of them were smaller than Florida - New Hampshire, Utah, Nebraska, Nebraska, Maine and others.

People like Hards can make dumb jokes but there’s no doubt Florida fared well (comparatively) during the pandemic. The economy stayed open and kids were in school. And despite having the 2nd oldest (i.e., vulnerable) population in the US our mortality rate was in the middle of the pack, about equal to California. People are moving here in droves and real estate prices are through the roof. Businesses are thriving. DeSantis, who won a squeaker in the last election, has a 60% approval rating - greatly due to how he navigated Covid.

[Uncle Rico]

Checked today, my portfolio still rocking.  Thanks, Joe!