Recent equity market volatility has raised the question about the health of the current economic expansion. I must confess it is difficult to find too much in the way of negative news. What is important about this is the fact that a recession does not seem to be around the corner in our view. William Delwiche, CMT, CFA of R.W. Baird noted in a recent commentary, “Bear markets are almost always associated with a recession. Given the latest economic data and the leading indicators that point to further growth, the odds of a recession are low”. We would agree.
Following are just some of the favorable data points and charts.
U.S. consumer consumption continues to trend higher, running at a 4% annualized pace based on quarterly consumption reported in last Friday’s advanced estimate of GDP. This is up from 3.05% in the second quarter. The consumer accounts for nearly 70% of economic growth and in and of itself, this is a positive input.
Redbook reports weekly changes in same-store sales and last week the report shows same-store sales up 5.5% on a year over year basis. This now represents two consecutive weeks of a slowing pace in the same store sales results. However, Redbook notes the 5.5% growth rate remains one of the strongest in more than ten years. Recent strength in the performance of retail stocks provides some confirmation of this strong retail environment.
Strength in the consumer is supported by a strong job market with job openings continuing to outpace job hires. Not shown is the fact job openings are up 18% on a year over year basis and exceed the number of individuals actually looking for jobs by nearly 1.2 million.
With a favorable job market and consumer spending continuing to grow, it should not be a surprise that consumer confidence is strong as well. The Conference Board’s most recent Consumer Confidence Index report noted,
