Second Quarter Growth

Posted: Jun 2, 2014 1:03:28 PM

After the writing of the blog, the ISM manufacturing index was revised for the second time, today.  The new number is 55.4, which closely matches the original expectation.  The newest information does not change Granite Group's forecast.

This morning we had an interesting error in the first published  ISM manufacturing index (a leading indicator).  The first report showed a slowing to the previous month with a reading of 53.2 but roughly an hour later they revised the number due to an error in the seasonal adjustment and the actual reading came in at 56. The expectation of 55.5 was now a beat and the market turned positive on the news of the reversal.

Most economists expect to see our economy pick up steam this year, but the evidence so far is mixed and that expectation does not seem to be bearing out  in the numbers.  GGA believes that the economy will not hit the 3+ GDP number in the 2nd quarter unless May’s retail sales dramatically improve.  We still have some time to pick up the pace for the rest of the year, but we need better data to support the expected growth.  Even if the economy  picks up in the second half of the year,  it would have to be an enormous number to reach the key 3% growth rate as the fed predicted and make up for the 1% decline from the 1st quarter.  This will be the 5th year in a row the Feds have predicted a better growth rate, and once again GGA believes the economy will be shy of this  goal.

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