Economic Growth Is Surprisingly Disappointing

Businesses and consumers have had enough time to react to the U.S. presidential election in a positive fashion. There’s just one problem: That isn’t the case.

After the stock market surge following the U.S. presidential election, you could assume investors are expecting a boost to economic growth.

That, in turn, pushed up expectations for economic indicators that are now being released. Since it has been seven months since the election, businesses and consumers have had enough time to react to the news in a similarly positive fashion.

There’s just one problem: That isn’t the case.

Citigroup tracks what it calls the Economic Surprise Index. It tracks economic reports such as retail sales, jobs numbers and consumer confidence. When these economic reports are better than expected, the index rises. When they are worse than expected, it falls.

Take a look:

Businesses and consumers have had enough time to react to the U.S. presidential election in a positive fashion. There’s just one problem: That isn’t the case.

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You can see it is a noisy indicator, moving back and forth, but after spending 2015 and 2016 mostly below the zero line, it started off the year beating economic expectations, and many investors would have liked to see that continue.

But the sharp decline that began in April continued in May. This will be something to keep an eye on. Further economic disappointment could easily trigger a correction in the markets, but if the index can rebound, that would be a strong signal of economic health that I’m sure President Donald Trump wouldn’t mind showing up.

Regards,

Chad Shoop, CMT
Editor, Automatic Profits Alert

  • jringo55

    Consumer spending keeps the economic engine in motion. The more people spend the more demand that is spun up. Supply and Demand are hand in hand. If demand falls, the supply has to fall. The confident consumer is paramount in this picture. If the consumer feels like his job is secure, wages are climbing, taxes are not increasing and the FED keeps interest rates modest, he will spend. The more confident the consumer is in mass, the better the economy. When the consumer get’s nervous, he will draw back from spending and the economy sputters. The GDP has not been much above 2% since 2008. That should tell you how confident the consumer is and why the economy is sputtering. If wages remain flat for the masses, this low GDP will be a norm for a long time. Other nations have been were we are. It’s called stagnation.

  • JThaddeus Toad

    To coin a phrase uttered by Franklin Roosevelt ” The only thing to fear …is fear itself ” … IMHO this is not a confident market place and the small investor for all intents and purposes is out of the game … This market place has become a casino for day traders and leveraged hedge funds… I am going long on tech and I intend to use this news letter asa tool…

  • Hugely thought out! Found myself staring at it for minutes.