Economic Outlook - April 2018
- The U.S. economy grew at a faster pace in the fourth quarter (Q4) than previously reported. The Commerce Department stated that the third revision for Q4 real GDP came in at an annual rate of 2.9%, up from 2.5% in the previous estimate. Upward adjustments to personal consumption expenditures and private inventory investment were the primary drivers. Consumer spending was revised up to a 4% increase, the largest gain since the end of 2014. The Atlanta Fed’s estimate for real GDP growth in Q1 currently stands at 2.3%. We anticipate GDP growth in the range of 2.5% – 3% for the full year 2018.
- U.S. factories reported robust demand for their products in the month of March, continuing the strength seen in the first two months of the year. The Institute for Supply Management’s (ISM) manufacturing index posted a reading of 59.3, down slightly from February but remaining near the highest levels of the last ten years. The three month performance is the strongest since mid-2004. Survey respondents cited strong demand domestically, as well as overseas, aided by a weak U.S. dollar and improving global economies. While concerns were raised with regards to tariffs and rising prices for materials, there is no current evidence of diminishing demand.
- The Bureau of Labor Statistics announced that nonfarm payrolls increased by 103,000 in March; the unemployment rate remained flat at 4.1% and wage growth rose slightly, up 2.7% from March of last year. The report was less than forecast, but combined with the addition of 326,000 jobs in February, growth continues to be healthy. While there was softness in construction payrolls that was weather related, and likely temporary, hiring in the manufacturing sector remained strong. The Labor Department reported U.S. manufacturers added 22,000 jobs in March, making the hiring over the last six months the strongest since 1998.
- The Federal Open Market Committee (FOMC) last met on March 20-21 and members voted unanimously to raise the benchmark federal-funds rate by a quarter-percentage point to a range between 1.5% and 1.75%. Officials said they expected to lift it another two or three times this year and three times next year. The FOMC increased its forecast for economic growth in 2018 to 2.7% and lowered its forecast for unemployment to 3.6% in 2019. Core inflation continues to run below the Fed’s target, but they expect core inflation, on a 12-month basis, to increase in the coming months and stabilize around their 2% objective. The Committee will meet next on May 1-2.
Sources: Bloomberg LLC, FactSet, Wall Street Journal, U.S. Department of Labor, Institute for Supply Management, ISI, The Economist
* This commentary reflects the opinions of Welch & Forbes based on information that we believe to be reliable. It is intended for informational purposes only, and not to suggest any specific performance or results, nor should it be considered investment, financial, tax or other professional advice. It is not an offer or solicitation.
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