Q4 GDP growth was just revised
upward to 1.0 percent, from the 0.7 percent first estimate. This, January’s
personal income figures and durable goods orders show consumers and even parts
of the manufacturing sector are still expanding, which is a good start for 2016
growth, vs. last January, when the severe winter stopped almost all growth in
Q1.
Median annual household income rose
0.7 Percent in November, or $57,173, according to a just released Sentier
Research report. It was in November that incomes finally surpassed the $56,698
median seen at the onset of the Great Recession. Why is this important?
“We have recaptured all of the
income losses that have occurred since the beginning of the last recession in
December 2007,” said Sentier’s Gordon Green, a former U.S. Census Bureau
official. And incomes are now up 0.4
percent from where they stood in January 2000—the month that Sentier Research
began tracking this data.
Personal income jumped 0.5 percent
in January as did consumer spending, both readings higher than expected. Also
higher than expected are the report's inflation readings especially the core
PCE which rose 0.3 percent for a year-on-year plus 1.7 percent. Rising inflation is also a sign of higher
profits, hence higher growth.
And the factory sector bounced back
strongly in January, indicated first by last week's industrial production
report and now by durable goods orders which are up a very strong 4.9 percent.
Aircraft did add to the gain but when excluding transportation equipment,
durable orders still rose 1.8 percent. And core capital goods orders, which had
been weakening, bounced back strongly with a 3.9 percent gain.
Machinery posted big gains in the
month especially for new orders as did computers and fabricated metals. Motor
vehicles showed strength in both orders and shipments. Total shipments jumped 1.9 percent in the
month, though shipments of core capital goods, held down by prior weakness in
orders, fell 0.4 percent to open the first quarter on a down note, says
Econoday.
But a positive in the report is a
0.1 percent dip in inventories which, together with the rise in shipments,
pulls down the inventory-to-shipments ratio to a leaner 1.64 from 1.67. And
unfilled orders, after contracting sharply in December, inched 0.1 percent
ahead in January.
Wages and salaries are now rising
at 4.5 percent year-over-year. It is the
most important number to look at in the personal income statistics, because it
is the major reason consumers are spending more after a year of saving from
lower gas prices. These salary earners
make up 80 percent of our workforce, which is sure to boost GDP growth above 3
percent this year, as we have been saying.
Harlan Green © 2016
Follow Harlan
Green on Twitter: https://twitter.com/HarlanGreen
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