Weekly Insight | May 1, 2019

The first-quarter earnings season is almost over with a quarter of the S&P 500 companies left to report. Sales and earnings for the period have been better than expected. Sales growth for reported companies sits at 5.18%, which is 0.32% better than expected. Earnings growth was not as negative as expected at   -0.38%. This less negative growth beat market forecasts by 5.35%. The major detractor for growth comes from performance in the Energy Sector. The Sector has seen a contraction in earnings of 27.96%.

First-quarter GDP growth numbers came out this week. The U.S. economy, as measured by GDP, grew by 3.2%. This is a lot better than the expected 2% and the previous month’s 2.2%. This growth in GDP was led by increases in personal consumption expenditures, private inventory investments and exports.

Personal consumption expenditure (PCE) for March was flat. The flatness in PCE remains a concern for the Federal Reserve. The PCE is the major inflation measure the Fed uses in making decisions. The flat month-over-month growth contributed to year-over-year growth at 1.6%. This is below the Fed’s inflation target of 2%. The Fed has indicated the decision to hold interest rates flat for the year is due in part to the low inflation number.

March saw increased orders of durable goods. Orders were up 2.7%, which was the best reading in eight months. This growth blew past the expected number of 0.8% and last month’s decline of 1.1%. A 7% increase in transportation equipment orders was a major contributor to the growth. This transportation equipment order increase comes after February’s decline of 2.9%.

We saw a little strength in housing in March. Pending home sales grew by 3.8% compared to the expected 1.5% and the previous month’s decline of 1%. The jump has been attributed to a decline in mortgage rates. Mortgage rates are at the lowest levels in more than a year.

Consumers are still optimistic. The Michigan Sentiment Index recorded a 97.2 reading in April. This is ahead of the expected 97 and the previous month’s 96.9. Consumer sentiment has often been seen as a leading indicator of economic growth.

A number of concern this week was the ISM Manufacturing Index number. The April reading of 52.8 was lower than the expected 55 and the lowest it has been in two years. However, the number being over 50 indicates there is still some strength in manufacturing.

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