Not So Fast

Atlas has noticed a pattern in recent economic data.  Our economy’s growth rate pushed through the 3.0 percent level (adjusted for inflation) during the middle quarters of last year; since then, the indicators have not been as strong.  Slower might best describe the recent developments.

The earliest estimate of fourth quarter 2017 gross domestic product (GDP) decelerated back below 3.0 percent as we reported last month, and Atlas is not expecting a strong revision next Wednesday.  First, our trade deficit widened in December and that will subtract more from the original GDP report than first expected.  Next, 2017’s final iteration of retail sales was less than first estimated, which will result in further subtraction.  Remember, these transactions represent roughly 20 percent of the economy.  Business investment took a breather as well in December as shipments of capital goods declined, and industrial production for the same period was lower than first counted.  Finally, productivity declined in the final three months of the year. 

Some of the early data for the current quarter have been challenged as well.  Retail sales in January fell even after the prior period’s downward revision.  Industrial production declined further last month, even after its downward revision.  Still, January data continue being collected for many indicators and February isn’t even over, so with over a month left, the first quarter of 2018 may surprise us yet.  Atlas has just noticed a slowing pattern, but that does not mean something serious is developing.

Slowing is not the same as contracting, and that is the most important takeaway.  Our economy is dynamic and never moves in a straight orderly pattern, even when times are good.  Atlas will continue monitoring numerous data points as they are released.  If a slowing pattern becomes more pronounced, we’ll keep you posted.