Consumers, Congress, and GDP
Thursday, September 07, 2017
Now that fall is setting in, I've had some time to think about consumers, Congress, and the GDP.
If you follow any of the regular news when it comes to the business channels it is hard not to see a story about how the consumer is not spending any money and that retail sales are dead. In fact, you constantly see and hear how the traditional brick and mortar stores are becoming obsolete, especially the traditional large mall anchor stores including Sears, Macy's, and JC Penney.
There's no denying that the business model for delivering goods and services to consumers is changing fast and that online shopping continues to challenge the traditional shopping experience.
In fact, sales at non-store retailers, including internet sales, have been growing at a 10-percent annual pace.1 That is not an indication of weak retail sales rather a shift toward doing business with companies that can literally deliver the goods with the least amount of fuss and effort.
Think about it. If you need new socks or underwear, do you really go to a store to purchase those items or do you just go to a website and have the same ones delivered to your door?
When it comes to Congress I have some bad news and good news. The bad news is that Congress adjourned for their August vacation without passing a single legislative bill this year. The good news is that Congress adjourned for their annual August vacation.
Even though Congress has done very little since January, the Labor Department reported that the private sector created 209,000 jobs in July. The unemployment rate dropped to 4.3-percent, and the employment participation rate ticked up to 62.9-percent.2 These numbers are very good and they are happening without any help from Congress.
Can you imagine what could happen if Congress comes back from vacation and actually puts a tax bill and health care bill on the President's desk for signature?
With less than one month to go in the third quarter, there are some signs that economic growth has been accelerating. I have referred to our economy over the last few years as a "Plow Horse" because of the fact that for most of President Obama's terms in office the Gross Domestic Product (GDP) of our country has averaged around a 2-percent annual growth rate.
If you look at the first quarter 2017 GDP number of only 1-percent growth and second quarter 2017 GDP growth of 2.6-percent, you could argue that we are still in that plow horse rate of under 2-percent on an annual basis.3 However, I would suggest you just look around where you live.
Are you seeing new housing being built, are you seeing new office space being built, and are you seeing signs in businesses indicating that jobs are available for skilled workers? I just finished moving my four adult children back to college in three different states in the last 10 days. I was in Bloomington, Ind.; Kent, Ohio; East Lansing; and Holland.
In all four of those cities I saw many signals that economic growth was taking place. At the end of the day, better economic growth means better profit growth and better profits will help push stock prices higher. If you are an investor I encourage you to stay invested.
Finally, with the devastation of Hurricane Harvey now being shown on the various news channels and the projected impact of Hurricane Irma, please remember there are many of your fellow citizens in need. If you feel inclined to help, please don t hesitate to donate to a reputable charity in the affected areas.4
1 - Bureau of Economic Analysis
2 - Department of Labor
3 - Haver Analytics
4 - The opinions expressed are subject to change with economic and market conditions. They are not meant as investment advice. Forward looking statements and market forecasts cannot be guaranteed and may not come to pass.