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Politics

Deputy Attorney General Rod Rosenstein announces the indictment of 13 Russian nationals for election meddling among other crimes on February 16, 2018. Mr. Rosenstein noted there was "no allegation in the indictment that the charged conduct altered the outcome of the 2016 election.
Deputy Attorney General Rod Rosenstein announces the indictment of 13 Russian nationals for election meddling among other crimes on February 16, 2018. Mr. Rosenstein noted there was “no allegation in the indictment that the charged conduct altered the outcome of the 2016 election.

Deputy Attorney General Rod Rosenstein submitted his expected resignation to President Donald Trump on Monday, effective May 11. The resignation comes shortly after Special Counsel Robert Mueller submitted his report on Russian interference in the 2016 election.

“His devotion to the Department and its professionals is unparalleled,” Attorney General William Barr said, adding he served the Justice Department “with dedication and distinction” in a statement. “Over the course of his distinguished government career, he has navigated many challenging situations with strength, grace, and good humor.”

On April 18, Attorney General Barr and Deputy Attorney General Rosenstein held a press conference to reveal the findings of the Special Counsel, who concluded the investigation on March 22.

Flanked by the deputy attorney general, Attorney General Barr said “the bottom line” is the Special Counsel found no evidence of collusion an no corrupt intent to support obstruction of justice.

Mr. Rosenstein, who appointed Special Counsel Mueller in May 2017, recently defended the handling of the case in the face of critics on both sides of the aisle.

During remarks at the Armenian Bar Association’s Public Servants Dinner on Thursday, April 25, the deputy attorney general said he “did pledge to do it right and take it to the appropriate conclusion.”

“I did not promise to report all results to the public, because grand jury investigations are ex parte proceedings,” he said. “It is not our job to render conclusive factual findings.”

“We just decide whether it is appropriate to file criminal charges.”

While Mr. Mueller offered President Trump and complete exoneration on whether he or anyone conspired with Russians during the 2016 election, he refused to render a judgement on obstruction of justice.

Attorney General Barr and Deputy Attorney General Rosenstein both concluded no charges were warranted. Even though they did not agree with the legal theories Mr. Mueller and his team presented, they nevertheless accepted them in order to make the decision.

“If lawyers cannot prove our case in court, then what we believe is irrelevant,” he said. “But in politics, belief is the whole ball game. In politics – as in journalism – the rules of evidence do not apply. That is not a critique. It is just an observation.”

Initially, Mr. Rosenstein was expected to resign after the U.S. Senate confirmed Attorney General Barr, as multiple sources confirmed. But the new attorney general asked him to stay on until the conclusion of the Special Counsel investigation.

The nation’s second highest law enforcement officer in the land has had a controversial tenure at the Justice Department (DOJ). Congressional investigators repeatedly accused him of stonewalling their investigations into DOJ corruption, including abuses to the Foreign Intelligence Surveillance Act (FISA).

In October 2018, Mr. Rosenstein snubbed then-GOP controlled House Oversight and House Judiciary Committees, both of whom wanted to question him over a report published by The New York Times in September. The report claimed he met with now-disgraced Obama Administration officials to discuss the possibility of entrapping President Trump.

James Baker, formerly the general counsel at the Federal Bureau of Investigation (FBI), told lawmakers in explosive testimony a week before that Mr. Rosenstein “seriously” considered secretly recording the president.

The former top FBI lawyer said the meeting included fired deputy director Andrew McCabe, disgraced FBI lawyer Lisa Page and Mr. Rosenstein. The potential plan to secretly record President Trump was an extension of the “insurance policy” to remove the president.

Mr. Baker said he met with fired former FBI deputy director Mr. McCabe and Ms. Page shortly after their meeting with Mr. Rosenstein in May 2017. Mr. McCabe was fired for “lack of candor” and leaking to the media “to advance his personal interests.” Ms. Page and Mr. Baker resigned together in disgrace for their center role in the scandal surrounding the probes into Hillary Clinton and Russia.

All of the heads of the FBI and DOJ under the Obama Administration have been either fired or have resigned in disgrace amid the controversy.

In February, reports surfaced that Attorney General Barr would choose Deputy Secretary of the U.S. Department of Transportation Jeffrey Rosen to replace Rod Rosenstein.

Deputy Attorney General Rod Rosenstein submitted his

Markets

Statistic graphic concept of the New York Stock Exchange (NYSE) Building in the Lower Manhattan Financial District, New York City. (Photo: Tomasz Zajda/AdobeStock/PPD)
Statistic graphic concept of the New York Stock Exchange (NYSE) Building in the Lower Manhattan Financial District, New York City. (Photo: Tomasz Zajda/AdobeStock/PPD)

A week that was chock full of single-stock volatility from first-quarter (Q1) 2019 earnings reports ended with the NASDAQ Composite (^IXIC) and S&P 500 (^SPX) posting new closing highs on both a daily and weekly basis.

Stocks’ relentless churn higher, despite earnings-induced selling in numerous market leaders, now have Broad Market Averages poised to log their fourth consecutive month of gains this Tuesday.

Of course, the conversation on Friday was dominated by the Q1 2019 gross domestic product (GDP) report showing the U.S. economy grew at a stunning +3.2% in what has proven to be the slowest quarter of the year for most of the last decade.

Prior to the 8:30 am release, investors were bracing for what was likely to be a rough end to the week. Earnings reports from technology bellwether Intel (INTC) and ExxonMobil (XOM) already had two market leaders, trading lower (INTC by -10%). This, the day after 3M (MMM) — a third Dow Jones Industrial Average (^DJI) member — had its worst daily decline (-13%) since October 1987.

While the GDP report was not without its blemishes, and of course a bevy of naysayers, it highlighted the rapid improvement in the economic data over the prior six weeks.

As recently as the second week of March, the consensus forecast for Q1 GDP was very near +1.0%. Yes, the +3.2% print was aided by the lowest U.S. trade deficit number in 8 months, and a higher than average inventory build.

But there were also shortfalls from consumer spending, business investment, and housing, all of which are likely to improve the next few quarters providing potential to pick up the slack should data from trade and inventories revert.

The upside surprise from GDP seemed to be just what investors needed to “look past” the downside volatility from Q1 corporate earnings. During a week when 25% of the S&P 500 reported earnings, investors were not only punishing companies that missed or lowered guidance but also also selling into any strength from those with good earnings.    

Now, it’s likely the “late cycle“ narrative on the economy will get a closer look. At least on Friday, the Macro view overshadowed the $5.58 decline to $52.43 in Intel and a weak semiconductor sector, following their disappointing earnings and lowered revenue guidance for 2019.  

The same was true for mass market retailers.

Walmart (WMT), was down $2.00 to $101.53 and Target (TGT) fell $4.62 to $77.12 in response to the one-day-delivery initiative from Amazon (AMZN), which was up $48 to $1950.61.

Energy stocks  were also mostly lower as crude oil was -3%, its largest decline this year.  The oil price decline was widely attributed to President Trump jawboning OPEC to increase supply after announcing the U.S. would begin to sanction countries buying Iranian Oil. Weaker than expected earnings from Exxon (XOM) -$1.73 or -2% to $80.49 likely contributed to the selling in energy stocks.   

This week, we’ll get another heavy dose of corporate earnings reports with Q1 results coming in from Alphabet (GOOG), ConocoPhillips (COP), Eaton Corp (ETN),  General Motors (GM), and Apple (AAPL) by the end of the day on Tuesday.

There is also a busy calendar of fresh data on the macro economy. We’ll start right out this morning with March data on Personal Income and Spending.

On Tuesday, we’ll get the heavily-watched Employment Cost Index for Q1 from the Labor Department, followed by March data on pending home sales from the National Association of Realtors (NAR) and a preliminary reading on consumer sentiment from the University of Michigan’s Survey of Consumers for April.

The stellar Q1 GDP report won’t change any of the specifics from earnings reports this week and it’s doubtful to have an impact on forward guidance, as that script is already written. The most interesting dynamic will be how sensitive investors are to a stronger than expected economy in their post earnings behavior.

Statistic graphic concept of the New York

World

Al-Baghdadi Vowed Admitted Defeat in Battle for Stronghold, But Vowed “Long Battle” and Discussed Easter Day Bombings in Sri Lanka

This image made from video posted on a militant website on Monday, April 29, 2019, purports to show the leader of the Islamic State group, Abu Bakr al-Baghdadi, being interviewed by his group's Al-Furqan media outlet. Al-Baghdadi acknowledged in his first video since June 2014 that IS lost the war in the eastern Syrian village of Baghouz that was captured last month by the Kurdish-led Syrian Democratic Forces. (Photo: Screenshot via Al-Furqan)
This image made from video posted on a militant website on Monday, April 29, 2019, purports to show the leader of the Islamic State group, Abu Bakr al-Baghdadi, being interviewed by his group’s Al-Furqan media outlet. Al-Baghdadi acknowledged in his first video since June 2014 that ISIS lost the war in the eastern Syrian village of Baghouz that was captured last month by the Kurdish-led Syrian Democratic Forces. (Photo: Screenshot via Al-Furqan)

Islamic State (ISIS) leader Abu Bakr al-Baghdadi appeared for the first time since 2014 in a video acknowledging defeat in the last stronghold in Syria. However, the leader rumored to be dead vowed to wage a “long battle” in the video published by Al-Furqan, the Islamic extremist group’s media propaganda outlet.

“In fact, the battle of Islam and its people against the Crusaders and their followers is a long battle,” he said speaking across from three men whose faces were covered and obfuscated.

The SITE Intelligence group said al-Baghdadi also discussed the Easter Day Islamic terror attacks in Sri Lanka, which killed more than 250 people. The U.S. State Department confirmed “several” U.S. citizens were among the dead.

While local authorities blamed a local extremist group, U.S. intelligence belief it is unlikely the group didn’t have help.

ISIS claimed responsibility for the horrific attack on Christians. The U.S. is offering $25 million for information leading to the capture of ISIS leader. Abu Bakr al-Baghdadi is one the few remaining senior ISIS commanders still alive and at-large since the group’s battefield defeat under the Trump Administration.

In just two years, the Islamic terror army suffered one battlefield loss after another and watched their so-called “caliphate” stripped away from an area the size of Great Britain to a geographically minuscule hold out in the Euphrates River valley.

Last month, ISIS was defeated in the Syrian village of Baghouz by Kurdish-led Syrian Democratic Forces.

In the video, al-Baghdadi appears seated on the floor with what appears to be an AK-47, or other version of the Russian-made Avtomat Kalashnikova propped up next to him.

Al-Baghdadi Vowed Admitted Defeat in Battle for

Economy

American flag and U.S. dollar financial and economy concept. (Photo: AdobeStock)
American flag and U.S. dollar financial and economy concept. (Photo: AdobeStock)

The Bureau of Economic Analysis (BEA) reported personal income and outlays for both March and February, which were both less-than-expected positive gains.

Personal income increased $11.4 billion (0.1%) in March. The consensus forecast was looking for a 0.4%, ranging from a low of 0.3% to a high of 0.5%. Disposable personal income (DPI) rose $0.6 billion, (less than 0.1%) and personal consumption expenditures (PCE) gained $123.5 billion (0.9%).

MarchConsensusForecast RangeActual
Personal Income – M/M ∆0.4%0.3% — 0.5%0.1%
Consumer Spending – M/M ∆0.7%0.5% — 0.8%0.9%
PCE Price Index M/M ∆0.3%0.2% — 0.4%0.2%
Core PCE price index – M/M ∆0.1%0.0% — 0.2%0.0%
PCE Price Index Y/Y ∆1.7%1.6% — 1.9%1.5%
Core PCE price index – Yr/Yr ∆1.7%1.6% — 1.9%1.6%

Personal outlays rose $126.5 billion in March, while personal saving came in at $1.03 trillion. The personal saving rate, which is defined as personal saving as a percentage of disposable personal income, was 6.5%.

February Personal Income and Outlays

Due to the partial government shutdown in the first quarter of 2019, the BEA also released a more complete personal income and outlays report for February.

Personal income increased $35.6 billion (0.2%) in February. The consensus forecast was looking for a 0.3%, ranging from a low of 0.1% to a high of 0.4%. Disposable personal income rose $23.0 billion (0.1%), and personal consumption expenditures gained by $11.7 billion (0.1%).

FebruaryPriorConsensusForecast RangeActual
Personal Income – M/M ∆-0.1%0.3%0.1% — 0.4%0.2%
Consumer Spending – M/M ∆0.1%0.3%0.1% — 0.6%0.1%
PCE Price Index M/M ∆-0.1%0.2%0.2% — 0.2%0.1%
Core PCE price index – M/M ∆0.1%0.1%0.1% — 0.2%0.1%
PCE Price Index Y/Y ∆1.4%1.3%
Core PCE price index – Y/Y ∆1.8%1.8%1.7% — 1.8%1.7%

Personal outlays rose $14.8 billion in February, while the personal saving came in at $1.16 trillion. The personal saving rate was 7.3%.

The Bureau of Economic Analysis (BEA) reported

Policy

Import, Export, Logistics concept - Map global partner connection of Container Cargo freight ship for Logistic Import Export background (Photo: AdobeStock/Elements of this image furnished by NASA)
Import, Export, Logistics concept – Map global partner connection of Container Cargo freight ship for Logistic Import Export background (Photo: AdobeStock/Elements of this image furnished by NASA)

Looking through an economic lens, what’s the best country in the world?

If your benchmark is economic liberty, then Hong Kong is the answer according to both the Fraser Institute and Heritage Foundation.

If per-capita GDP or per-capita wealth is your benchmark, then Monaco wins the prize.

And you get different answers if you focus on specific features such as competitiveness (the United States) or ease of doing business (New Zealand).

You can also measure national performance by looking at key economic variables.

And that’s what Professor Steve Hanke of Johns Hopkins University has done.

In the sphere of economics, misery tends to flow from high inflation, steep borrowing costs and unemployment. …Many countries measure and report these economic metrics on a regular basis. Comparing them, nation by nation, can tell us a lot about where in the world people are sad or happy. …To answer this question, I update my annual Misery Index measurements.

Hanke explains the evolution of the Misery Index and how he puts together his version.

The first Misery Index was constructed by economist Art Okun in the 1960s as a way to provide President Lyndon Johnson with an easily digestible snapshot of the economy. That original Misery Index was just a simple sum of a nation’s annual inflation rate and its unemployment rate. The Index has been modified several times, first by Robert Barro of Harvard and then by myself. My modified Misery Index is the sum of the unemployment, inflation and bank lending rates, minus the percentage change in real GDP per capita. Higher readings on the first three elements are “bad” and make people more miserable. These are offset by a “good” (GDP per capita growth), which is subtracted from the sum of the “bads.”

You can see the entire list of 95 nations (some countries don’t report adequate data, so they aren’t counted) by clicking here.

And here are the nations with the best scores (remember, this is a Misery Index, so the top results are at the bottom of the list).

Professor Hanke comments on Thailand’s first-place results and Hungary’s second-place results.

Thailand takes the prize as the least miserable country in the world on the 2018 Misery Index. It’s 2018 rank of No. 95 out of 95 countries is a stunner. …Hungary delivered yet another stunner, making a dramatic improvement from 2017 to 2018.  It comes in at No. 94 as the second least miserable country in the world. While the European Union and the international elites have thrown everything they can throw at Prime Minister Viktor Orbán, it’s easy to see why he commands a strong following at home.

Keep in mind, by the way, that Hanke’s list is a measure of annual economic outcomes.

So a relatively poor country can get a very good score. Indeed, they should get comparatively good scores according to convergence theory.

Assuming, of course, that they have decent policy.

However, if you look at the nations with the most miserable outcomes, you can see that many countries don’t have decent policy.

Here’s Hanke’s analysis of the world’s worst performers.

Venezuela holds the inglorious title of the most miserable country in the world in 2018, as it did in 2017, 2016, and 2015. The failures of President Nicolás Maduro’s socialist, corrupt petroleum state have been well documented… Argentina jumped to the No. 2 spot after yet another peso crisis. Since its founding, Argentina has been burdened with numerous economic crises. Most can be laid at the feet of domestic mismanagement and currency problems (read: currency collapses). To list but a few of these crises: 1876, 1890, 1914, 1930, 1952, 1958, 1967, 1975, 1985, 1989, 2001, and 2018.

For what it’s worth, if you look at the actual Misery Index numbers, Venezuela is in first place by an enormous margin. Chalk that up as another “victory” for socialism.

Moreover, I’m not surprised to see that Jordan, Ukraine, and South Africa are doing poorly. Sadly, there’s not much hope for improvement in those nations.

It’s also not a surprise to see Brazil on the list, though there may be room for optimism if the new government can adopt meaningful reforms.

P.S. Professor Hanke noted that Arthur Okun created the first Misery Index. Okun also is famous for his explanation of the equity-efficiency tradeoff. Okun supported redistribution in order to increase equality of outcomes, but he was honest and admitted that this would mean less prosperity. Too bad international bureaucracies such as the OECD and IMF don’t share Okun’s honesty.

Looking through an economic lens, what’s the

World

Flags for the United States of America (USA) and Afghanistan realistic graphic concept. (Photo: AdobeStock)
Flags for the United States of America (USA) and Afghanistan realistic graphic concept. (Photo: AdobeStock)

Representatives of the United States (US), China, and Russia reached an 8-point consensus during meetings in Moscow last week on the Afghan peace process.

In a joint statement following the Trilateral Meeting on the Afghan Peace Process, the three parties agreed on the following.

  1. The three sides respect the sovereignty, independence, and territorial integrity of Afghanistan as well as its right to choose its development path. The three sides prioritize the interests of the Afghan people in promoting a peace process.
  2. The three sides support an inclusive Afghan-led, Afghan-owned peace process and are ready to provide necessary assistance. The three sides encourage the Afghan Taliban to participate in peace talks with a broad, representative Afghan delegation that includes the government as soon as possible. Toward this end, and as agreed in Moscow in February 2019, we support a second round of intra-Afghan dialogue in Doha (Qatar).
  3. The three sides support the Afghan government efforts to combat international terrorism and extremist organizations in Afghanistan. They take note of the Afghan Taliban’s commitment to: fight ISIS and cut ties with Al-Qaeda, ETIM, and other international terrorist groups; ensure the areas they control will not be used to threaten any other country; and call on them to prevent terrorist recruiting, training, and fundraising, and expel any known terrorists.
  4. The three sides recognize the Afghan people’s strong desire for a comprehensive ceasefire. As a first step, we call on all parties to agree on immediate and concrete steps to reduce violence.
  5. The three sides stress the importance of fighting illegal drug production and trafficking, and call on the Afghan government and the Taliban to take all the necessary steps to eliminate the drug threat in Afghanistan.
  6. The three sides call for an orderly and responsible withdrawal of foreign troops from Afghanistan as part of the overall peace process.
  7. The three sides call for regional countries to support this trilateral consensus and are ready to build a more extensive regional and international consensus on Afghanistan.
  8. The three sides agreed on a phased expansion of their consultations before the next trilateral meeting in Beijing. The date and composition of the meeting will be agreed upon through diplomatic channels.

As People’s Pundit Daily (PPD) reported, the Trump Administration is committed to withdrawing forces from Afghanistan to end more than 17 years of war.

Special Representative for Afghanistan Reconciliation Zalmay Khalilzad is in the middle of a trip that began April 21 and ends May 11. It includes stops in Afghanistan, India, Pakistan, Qatar, Russia, and the United Kingdom.

In January, U.S. and Taliban officials touted “significant progress” in peace talks in Qatar over a proposed ceasefire and troop pullout.

But in a setback, the Taliban recently announced a plan for a spring offensive, and continue to stage near-daily attacks against the Afghan government and security forces. It was followed by reports of civilian casualties in the middle of the trip aiming to promote the Afghan peace process.

“We deeply regret any loss of innocent life during military operations. We never target innocents,” Special Representative Khalilzad tweeted. “War is treacherous & unintended consequences are devastating.”

“While we strive to prevent casualties, real solution is a ceasefire or reduced violence as we pursue lasting peace.”

While Special Representative Khalilzad works to build international support for the Afghan peace process, Secretary of State Michael R. Pompeo met Friday in Washington with Kazakhstani Presidential Special Envoy and National Security Committee Chairman Karim Masimov to build regional support.

The largest divide remains over the proposed ceasefire, which the Taliban has resisted. In Doha, Special Representative Khalilzad will reenter negotiations with the Taliban and urge their participation in intra-Afghan dialogue.

The longest war in U.S. history began almost immediately after the Islamic terror attacks on September 11, 2001. President Donald Trump has long-criticized continued U.S. involvement, and as a candidate campaigned on prioritizing illicit drug trades over foreign intervention.

Afghan President Ashraf Ghani opposes a U.S. withdrawal, blaming the Russian withdrawal on May 15, 1988 for the civil war.

Nevertheless, after more than 17 years – deploying at peak more than 100,000 troops, sacrificing the lives of nearly 2,400 U.S. soldiers, spending more than $1 trillion on military operations, more than $100 billion on “nation-building,” or funding and training an army of 350,000 Afghan soldiers – the Taliban still controls nearly half of Afghanistan.

As was exclusively reported by People’s Pundit Daily (PPD), opium production in Afghanistan has never been more robust than it is now. The most recent annual opium survey revealed a record high 9,000 metric tons produced for the year, rising 87% compared with 2016.

Flags for the United States of America

Economy

Sale, consumerism and people concept - happy family with child and shopping cart buying food at grocery store or supermarket. (Photo: PPD/AdobeStock/Syda Productions)
Sale, consumerism and people concept – happy family with child and shopping cart buying food at grocery store or supermarket. (Photo: PPD/AdobeStock/Syda Productions)

The Survey of Consumers, a closely-watched gauge of consumer sentiment, rose from the preliminary to 97.2 in April, slightly beating the consensus forecast. The preliminary reading came in at 96.9 earlier this month.

Index (April)PrelimPriorConsensusForecast RangeActual
Consumer Sentiment Index96.996.997.1 96.9  — 97.7  97.2
Current Economic Conditions114.2113.3——112.3
Index of Consumer Expectations85.888.8——87.4

“The Index of Consumer Sentiment has moved sideways, recording only small monthly variations since Trump first entered office,” Richard Curtain, chief economist for the Survey of Consumers, said. “The Sentiment Index has averaged 97.2 in the past 28 months, identical to the April 2019 reading.”

The Consumer Sentiment Index has remained between 95.0 and 99.0 for 21 of the past 28 months, with +/- 2.0 variations that were statistically insignificant.

Mr. Curtain also noted consumer sentiment has not been this favorable for this long since the late stages of the expansion during the second half of the Clinton Administration.

The Current Economic Conditions Index came in at 112.3, down from the 113.3 in March and the preliminary reading of 114.2. The Index for Consumer Expectations came in at 87.4, down from the reading of 88.8 in March but higher than the preliminary 85.8.

“When asked about their financial prospects for the year ahead, 44% of consumers anticipated improvements compared with just 8% who expected worsening finances,” Mr. Curtain added. “This was the best overall reading since 2004.”

In April, a record high percentage reported they expected to be better off financially over the next five years, at 60%. Worth noting, the question was asked sporadically from 1979 to 1985 and then consistently from 2011 to present.

Survey of Consumers data overall point to inflation-adjusted consumer spending (personal consumption expenditures/PCE) will grow by 2.5% in 2019.

The final consumer sentiment reading for April

Economy

Gross domestic product (GDP) graphic concept with yellow square pixels on a black matrix background. (Photo: AdobeStock)
Gross domestic product (GDP) graphic concept with yellow square pixels on a black matrix background. (Photo: AdobeStock)

The Bureau of Economic Analysis (BEA) “advance” estimate for first quarter (Q1) 2019 gross domestic product (GDP) came in at a 3.2% seasonally-adjusted annual rate (SAAR). Real GDP rose 2.2% in Q4 2018 and by 2.2% in Q1 2018.

The consensus forecast was calling for a more moderate but still solid 2.3% SAAR.

*Chart will update to reflect advance estimate. It initially reflects forecast.

Seasonally-Adjusted Annual Rate (SAAR)PriorConsensus ForecastForecast RangeActual
Real GDP – Q/Q ∆2.2%2.3%1.4% — 2.8%3.2%
GDP Core Price Index – Q/Q ∆ 2.0%1.6%1.3% — 2.2%1.3%
GDP Price Index – Q/Q ∆1.7%1.7%1.2% — 2.8%0.9%
Real Consumer Spending – Q/Q ∆2.5%1.1%0.3% — 2.6%1.2%

The BEA will release a more complete “second estimate” for Q1 2019 GDP — along with Corporate Profits — on May 30. The final and “third estimate” to the former and a revision to the latter is scheduled to be released on June 27.

“The last trade deficit report coming in below -$50B was a bigger deal than expected,” Tim Anderson at TJM Investments said.

The U.S. trade deficit fell below $50 billion in February at $49.4 billion, down $1.8 billion from $51.1 billion and easily beating the forecast. It was the first dip below the $50-billion threshold since June 2018.

“This really highlights the difference between ‘academic economists’ and ‘business economists’,” Mr. Anderson added. “While the NY FED had an estimate of +1.8%, the Atlanta FED GDPNow forecast was +2.7%.”

“Clearly, the NowCast model was much more responsive to the rapidly improving economic data released in March and April.”

Current dollar GDP rose a solid 3.8%, or $197.6 billion, in Q1 2019 to $21.06 trillion. That’s down only slightly from 4.1%, or $206.9 billion in Q4 2018.

Consumer Spending

Worth noting, this beat doesn’t reflect what turned out to be stronger-than expected consumer spending.

The price index for gross domestic purchases increased 0.8 percent in the first quarter, compared with an increase of 1.7 percent in the fourth quarter (table 4). The PCE price index increased 0.6 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.3 percent, compared with an increase of 1.8 percent.

Personal Income

Current-dollar personal income rose $147.2 billion in Q1 2019 juxtaposed to an increase of $229.0 billion in Q4 2018, largely the result of personal interest income, personal dividend income and proprietors’ income.

That decline was only in part offset by an acceleration in personal current transfer receipts.

Disposable personal income (DPI) increased $116.0 billion, or 3.0%, in Q1 2019, compared with an increase of $222.9 billion, or 5.8%, in Q4 2018. Real disposable personal income rose 2.4% versus a 4.3% increase the prior quarter.

Personal saving was $1.11 trillion in Q1 2019, up from $1.07 trillion in Q4 2018. The personal saving rate — defined as personal saving as a percentage of disposable personal income — inched up to 7.0% in Q1 2019. It came in at 6.8% in Q4 2018.

The "advance" estimate for first quarter (Q1)

Economy

‘Advance’ Q1 2018 GDP Came in at 2.0%, Was Revised Higher in Final

For all the talk of a potential recession earlier this year, the consensus forecast for first quarter (Q1) 2019 gross domestic product (GDP) matches last year.

UPDATE: The Bureau of Economic Analysis (BEA) “advance” estimate for first quarter (Q1) 2019 gross domestic product (GDP) came in at a 3.2% seasonally-adjusted annual rate (SAAR). Read full story here (no paywall).

The “advance” estimate is due out Friday morning from the Bureau of Labor Statistics (BEA), and if it holds it will be slightly stronger than the “final” 2.2% seasonally-adjusted annual rate (SAAR) reported for Q1 2018.

Seasonally-Adjusted Annual Rates (SAAR)PriorConsensus ForecastForecast Range
GDP core price index – Q/Q ∆ 2.0%1.6%1.3 % to 2.2 %
Real GDP – Q/Q ∆2.2%2.3%1.4% to 2.8%
GDP price index – Q/Q ∆1.7%1.7%1.2% to 2.8%
Real Consumer Spending – Q/Q ∆2.5%1.1%0.3% to 2.6%

“The ‘academic economists’ are way behind the ‘market-driven economists’ in revising their Q1 GDP estimates,” Tim Anderson, PPD contributing economist and analyst at TJM Investments said. “They are responding to improvements in both raw data and consensus surveys during March and into April.”

“For all the talk about a slowing economy in 2019, many will find it hard to reconcile a Q1 GDP report that matches or beats the ‘advance’ Q1 report in 2018.”

Mr. Anderson noted that the advance or initial read for Q1 2018 GDP came in at 2.0%, and was revised higher to 2.2% in the final. The advance estimate due out tomorrow at 8:30 AM EST should be compared with that number accordingly.

The BEA will release a more complete “second estimate” for Q1 2019 GDP — along with Corporate Profits — on May 30. The final and “third estimate” to the former and a revision to the latter is scheduled to be released on June 27.

The Atlanta Fed’s final GDPNow model forecast for Q1 2019 GDP was revised to 2.7% on Thursday, April 25. That’s down from 2.8% on April 19.

It was the result of real residential investment growth declining from 3.5% to 1.3%, and did not include the stronger-than-anticipated 2.7% gain in durable goods orders reported earlier this morning. That data will not be included in the BEA’s advance estimate due out tomorrow, either.

The New York Fed Nowcasting model, which hasn’t been updated since April 13, stands at just 1.4% and is even more incomplete.

The consensus forecast for first quarter (Q1)

Markets

A downtrend depicts the graphic concept of market volatility. (Photo: AdobeStock)
A downtrend depicts the graphic concept of market volatility. (Photo: AdobeStock)

Stocks put in a solid performance Wednesday after their breakout session the previous day, in which both the NASDAQ Composite (^IXIC) and S&P 500 (^SPX) closed at fresh all-time highs.

The Dow Jones Industrial Average (^DJI), NASDAQ, and S&P 500 each settled with fractional losses of -0.2% on Wednesday and market breadth was flat even, with nearly an identical number of advancing and declining issues. But markets continued to have significant volatility in single-stock issues during the heaviest three-day stretch of first-quarter (Q1) earnings reports this season.

This dynamic will be highlighted on Thursday with both significant gains and losses in numerous high profile names.

After the close Wednesday, earnings reports from both Microsoft Corporation (MSFT) and Facebook (FB) are being cheered by investors, with gains in pre-opening trading of +5% and +8%, respectively. Microsoft has closed at an all-time high each of the last 2 days, and could very well likely do so again on Thursday.

Unrelated to earnings, Occidental Petroleum (OXY) has set off an old fashioned bidding war in the Oil Patch with an offer of cash and stock for Anadarko Petroleum (APC) that is valued at a significant premium to the proposed bid from Chevron (CHV) just one week ago. Anadarko (APC) rallied +10% on Wednesday in response.

On the negative side, 3M (MMM), a long-standing component of the DJIA, released earnings this morning that have set off a decidedly negative reaction from investors with the stock lower by more than -15% in pre-opening trading. Their conference call was scheduled for 9:00 am this morning, and will certainly garner plenty of attention.

Amazon Inc. (AMZN) is scheduled to release their Q1 earnings after the close of trading this afternoon. It appears that expectations are high, as the stock has rallied +12% over the last 6 weeks to close at its highest level since the first week of October last year.

Never a dull moment.

Markets have significant volatility in single-stock issues

People's Pundit Daily
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