Economists are divided over the reasons behind the slowdown in U.S. productivity growth, but its effects on future economic growth are unquestionably negative.
If you follow financial news or ask most investors, monthly nonfarm payrolls, retail sales or perhaps consumer prices are typically considered critical U.S. economic releases. These measures provide a good read on the short-term state of the economy, and they do deserve the extra focus.
Market Realist – Investors and analysts are closely watching certain economic indicators these days, including the jobs numbers.
Lately, jobs created in the US economy have led to a lot of optimism among investors toward the labor market’s health. And, indeed, the last seven months have seen over 2 million jobs created in the US, while the last 13 months have seen at least 200,000 jobs created. This is, no doubt, great news. The US equity markets (SPY)(IVV) jumped following these reports, while Treasury (TLT)(IEF) yields rose. This meant that a rate hike could happen sooner rather than later—perhaps even as early as June.
Market Realist – Retail sales have been sluggish.
However, as the graph above shows, month-over-month retail sales have been negative in the last three months. This trend has been a talking point lately. While oil (USO) prices have slumped over the last six months or so—which acts like a tax cut for consumers—retail sales have been sluggish in the last three months. We could blame this trend on the weather, which discourages people from going to the mall or to a restaurant. Instead, they’d prefer to do their shopping online. This is a negative for consumer-related ETFs, including the consumer discretionary (XLY) and consumer staple (XLP) stocks. This may hurt the 1Q15 GDP (gross domestic product), as it hurt the GDP in 1Q14.
However, the indicators we’ve discussed above only relate to the short term. Read on to find out why US GDP figures could be muted from now on.