Gus Faucher Stuart Hoffman William Adams Kurt Rankin Chief Economist Senior Economic Advisor Senior Economist Economist

Transcription

1 il 27, 2018 Gus Faucher Stuart Hoffman William Adams Kurt Rankin Chief Economist Senior Economic Advisor Senior Economist Economist The U.S. economy expanded 2.3 percent at a seasonally-adjusted annualized rate in the first quarter of Although this was softer than the average 3 percent growth over the previous three quarters, it was better than the 2.0 percent consensus and the 1.8 percent forecast from PNC. Real GDP was up 2.9 percent from one year earlier in the first quarter, the biggest year-over-year gain since the second quarter of However, the details were a bit weaker than the headline number suggests. Inventories added 0.4 percentage point to growth, after being a big drag in the fourth quarter of Thus final sales of domestic product, which is GDP minus the change in inventories and measures domestic and foreign demand for goods and services produced in the United States, increased 1.9 percent at an annual rate in the first quarter. Despite the boost to after-tax incomes from tax cuts, consumer spending rose just 1.1 percent at an annual rate in the first quarter, the smallest gain in almost five years. Some of the weakness came from lower auto sales early in the year, but other components of consumer spending were also soft. Consumer spending added 0.7 percentage point to growth. Business fixed investment was better, expanding 4.6 percent and adding 0.8 percentage point to growth. There was an especially big increase is commercial construction. Housing investment was unchanged in the first quarter, but this followed a big gain in late 2017 with reconstruction after last year s hurricanes. Trade was a small positive for growth, adding 0.2 percentage point. Exports rose more than imports, so the trade deficit narrowed. Government also added 0.2 percentage point to growth, with contributions from both federal and state and local spending. Real personal disposable income rose a very good 3.4 percent annualized in the first quarter, bolstered by personal income tax cuts. Putting it all together the first quarter GDP report was good but not great. The current economic expansion is now in its 106 th month, according to the National Bureau of Economic Research, putting it in a tie for the second-longest expansion in U.S. history. The expansion will continue through the rest of Consumer spending will bounce back as job gains, wage gains, and tax cuts support purchases. Business investment will get a boost from good corporate profits, the corporate income tax cuts, and a tight labor market that will encourage business spending to make workers more productive. Housing will also be a positive as the recovery from the Great Recession continues. Trade will be a negative, despite an expanding global economy, as imports increase more than exports. Government will also add to growth this year as a result of the recent deal in Congress to raise caps on discretionary federal spending. PNC expects real GDP growth of 2.8 percent in 2018 and 2.9 percent in 2019, averaged across the four quarters of the year. On a year-over-year basis growth will accelerate to above 3 percent in late 2018 and early 2019, before slowing later next year as the impact of fiscal stimulus wears off. The Employment Cost Index rose 0.8 percent in the first quarter of The ECI tracks worker compensation, controlling for changes in industry and occupational mixes. Most notably, wages in the private sector rose 1.0 percent in the quarter, the biggest increase since Public-sector wages rose 0.4 percent in the first quarter. Benefits costs rose 0.7 percent, including a 0.8 percent increase in the private sector. On a year-over-year basis compensation was up 2.7 percent in the first quarter, the same pace as in the fourth quarter of But private-sector wages were up 2.9 percent in the first quarter from one year earlier, the fastest rate of increase since Fed Funds Rate Target Range Mid- Point (after the FOMC meeting on 5/2/18) Range: 1.50 to 1.75 percent Median: percent 1.13% No rate hike at the May 1-2 FOMC meeting but we think the FOMC will hike the funds rate another 25 bps at their June meeting.

2 il 27, 2018 Personal Income (4/30, Monday) 0.4% Up 0.3 percent. Personal Consumption Expend. (4/30, Monday) 0.2% Up 0.5 percent. The PCE price index is unchanged for total and up 0.1 percent for core bring both up to near the FOMC s target of 2 percent from a year ago. ISM (Manufacturing) (5/1, Tuesday) Range: 57.0 to 60.0 percent Median: 58.5 percent Construction Spending (5/1, Thursday) Range: 0.0 to 0.7 percent Median: 0.5 percent ADP Employment Survey (5/2, Wednesday) Range: 165,000 to 220,000 Median: 201, % 0.1% 241K A dip to a still strong 59. Up 0.5 percent. Up 165,000. Q1 Nonfarm Productivity (Prelim) Range: 0.5 to 1.3 percent Median: 0.9 percent 0.0% (Q4 2 nd Est.) Up 1.0 percent. Q1 Unit Labor Costs (Prelim) Range: 1.3 to 3.6 percent Median: 3.0 percent 2.5% (Q4 2 nd Est.) Up 2.5 percent Trade Balance Range: -$57.8 to -$48.7 billion Median: -$52.3 billion -$57.6B A big narrowing to -$50.3 billion. Factory Orders Range: 0.5 to 1.7 percent Median: 1.3 percent 1.2% Up 1.2 percent. Shipments unchanged. ISM-NMI Range: 57.0 to 59.0 percent Median: 58.2 percent 58.8% Up to a strong 59. Nonfarm Payrolls Range: 175,000 to 255,000 Median: 190, K Up 175,000.

3 il 27, 2018 Private Payrolls Range: 170,000 to 250,000 Median: 190, K Up 170,000. Manufacturing Payrolls Range: 5,000 to 25,000 Median: 20,000 22K Up 25,000. Unemployment Rate Range: 3.9 to 4.1 percent Median: 4.0 percent 4.1% Down to 3.9 percent reflecting a 250,000 rise in the household measure of jobs and a 50,000 rise in the labor force. Average Hourly Earnings Range: 0.2 to 0.3 percent Up 0.3 percent bringing the rise from a year ago up to 2.8 percent. Hours Worked Range: 34.4 to 34.6 hours Median: 34.5 hours 34.5hrs Unchanged at 34.5 hours. Consumer Credit (5/7, Monday) Range: $8.9 to $34.5 billion Median: $15.8 billion $10.6B Up $16 billion on strong retails sales in ch. PPI (5/9, Wednesday) Median: 0.3 percent Up 0.3 percent. Gasoline prices up over 3 percent. PPI (ex-food & energy) (5/9, Wednesday) Range: 0.1 to 0.4 percent CPI (5/10, Thursday) Range: 0.2 to 0.4 percent Median: 0.3 percent -0.1% Up 0.3 percent. Gasoline prices up nearly 3 percent. CPI (ex-food & energy) (5/10, Thursday) Range: 0.2 to 0.2 percent 0.2% Export Price Index (5/11, Friday)

4 il 27, 2018 Import Price Index (5/11, Friday) Range: 0.2 to 0.7 percent Median:0.5 percent 0.0% Up 0.5 percent with a double-digit jump in imported crude oil prices. May U. Mich Consumer Sentiment (prelim) (5/11, Friday) Range: 97.0 to Median: () Up to a strong 100. Visit to view the full listing of economic reports published by PNC s economists. Disclaimer: The material presented is of a general nature and does not constitute the provision of investment or economic advice to any person, or a recommendation to buy or sell any security or adopt any investment strategy. Opinions and forecasts expressed herein are subject to change without notice. Relevant information was obtained from sources deemed reliable. Such information is not guaranteed as to its accuracy. You should seek the advice of an investment professional to tailor a financial plan to your particular needs The PNC Financial Services Group, Inc. All rights reserved.

5 0Ok, 1 Gus Faucher Stuart Hoffman William Adams Kurt Rankin Chief Economist Senior Economic Advisor Senior Economist Economist il/may 2018 MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY RETAIL SALES Total Ex-Autos Jan -0.2% 0.1% Feb HOUSING(000) Starts Permits Jan 1,339 1,377 Feb 1,295 1,321 1,319 1, LEADING INDICATORS Jan 0.8% Feb MFG and TRADE Inv Sales Dec 0.6% 0.5% Jan Feb EXISTING HOME SALES(000) Jan 5,380 Feb 5,540 5, PERSONAL Income Spending Jan 0.4% -0.2% Feb Chicago PMI () IND PROD CAP UTIL Jan -0.2% 77.1% Feb CASE-SHILLER HPI 20-City Composite(SA) M/M Y/Y Dec 0.7% 6.3% Jan Feb NEW HOME SALES(000) Jan 644 Feb CB CONSUMER CONFIDENCE Total Current Expect Feb ISM MFG INDEX Feb 60.8% 59.3 CONSTRUCTION SPENDING Jan 0.0% Feb 0.1 Autos Light Dom For Truck Total Feb May 1 Fed Beige Book 5/3 ISM NON-MFG INDEX Feb MANUFACTURERS Ship Inv Orders Jan 0.7% 0.4% -1.3% Feb ADP Employment () FOMC Statement - 2pm ADV DURABLE GOODS Total Ex-Transp Jan -3.6% - Feb Unemployment Claims (000) Feb Nonfarm Business (Q1 1st) Productivity & Costs Productivity Unit Labor Costs 1Q Q Q Q 17(1 st ) Q 17(2 nd ) Q 18(1 st ) TRADE BALANCE ($B) Jan -$56.7 Feb -$ GROSS DOMESTIC PRODUCT 1st Qtr (1st estimate) Real GDP Price Index 2Q % 1.0% 3Q Q 17(3 rd ) Q 18(1 st ) Employment Cost Index Total W&S Fringes 1Q Q Q Q Q U of M Consumer Sentiment (Final) EMPLOYMENT REPORT U.Rate Jobs(000) Feb CONSUMER CREDIT($B) Jan +$15.6 Feb +$ PRODUCER PRICE INDEX CONSUMER PRICE INDEX Total Core Total Core Feb 0.2% 0.4% Feb 0.2% 0.2% Federal Budget () Import Price () U of M May Consumer Sentiment (Prelim)