GREEN SHOOTS IN APRIL ECONOMIC DATA
Green shoots appeared in U.S. economic data as the economy entered the second quarter.
Leading indicators signaled low odds of a recession in the coming year. The Conference Board’s Leading Economic Index (LEI) rose 3.1% year over year in March, breaking a five-month slide in annual growth.
Jobs data at the beginning of April confirmed that signs of labor market weakness earlier in the year were temporary. Nonfarm payrolls growth exceeded estimates, while the unemployment rate held steady near a cycle low. Overall, the U.S. labor market remained robust for this point in the cycle, with no apparent sign of the rapid slowing that has often occurred before the onset of a recession.
Consumer inflation slowed, reflecting the sting of lower global demand [Figure 2]. The core Consumer Price Index, which excludes food and energy, increased 2% year over year, the slowest pace in 13 months. Core personal consumption expenditures (PCE), the Federal Reserve’s (Fed) preferred inflation gauge, rose 1.6% year over year in March, its slowest growth since September 2017.
However, wage and producer price growth remained steady, signaling pricing pressures continued to build. Average hourly earnings grew 3.2% year over year, a level of growth that should continue to bolster consumer confidence and support consumer spending. The core Producer Price Index (PPI), which excludes food and energy prices, rose 2.6% year over year in March.
U.S. manufacturing reports sent mixed signals about the health of the sector in March. The Institute for Supply Management’s (ISM) manufacturing Purchasing Managers’ Index (PMI), a gauge of U.S. manufacturing health, rebounded slightly after hitting a new low in February. Markit’s PMI declined to a 21-month low in March, but preliminary data for April showed a slight rebound in manufacturing activity.
Consumer and business spending data ticked up, though confidence gauges deteriorated further, reflecting U.S. consumers’ and businesses’ uncertainty amid global headwinds. Retail sales rose 1.6% in March, its biggest monthly gain since September 2017, while new orders for nondefense capital goods grew 1.3% in March, the biggest monthly rise since July 2018, according to preliminary data. However, the Conference Board’s Consumer Confidence Index slid in March, while the National Federation of Independent Business’s (NFIB) measure of business confidence was unchanged near a two-year low.
ECB, Bank of Japan Keep Rates Unchanged
The Fed took a break from rate changes prior to its next policy meeting, scheduled to conclude May 1. The European Central Bank (ECB) announced April 10 that it would leave rates unchanged and reiterated its plans to hold rates through 2019. The ECB noted concerns around trade uncertainty and Brexit, and policymakers reportedly discussed plans to provide more stimulus if economic growth in the region doesn’t improve. The Bank of Japan (BoJ) also kept rates unchanged at historically low levels in an April 25 announcement and pledged to keep rates low until at least the spring of 2020.
Click here to download a PDF of this report.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security.
To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted. All performance referenced is historical and is no guarantee of future results.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
For a list of descriptions of the indexes referenced in this publication, please visit our website at lplresearch.com/definitions.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
If you are receiving investment services out of a bank or credit union, please note that this financial institution is not a registered broker/dealer, and is not an affiliate of LPL Financial. The investment products sold through LPL Financial are:
Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by Any Government Agency | Not a Bank/Credit Union Deposit
Tracking #1-851737 (Exp. 05/20)