- by New Deal democrat
Per my comments yesterday, so much data was released (with none coming today) that I did not report on several of the items. I’ll get to new home sales later, but first let’s talk about new orders and revised GDP.
The central theme of yesterday’s personal income and spending report was that real incomes have fallen significantly since last September, such that typically by now we would be in a consumer-led recession. That hasn’t happened (yet!) in part because consumers are digging into their savings and running up credit card debt to deal with the shortfall. The other part is because the producer part of the economy is booming (or bubbling) on the back of massive AI-related spending.
So let me start with my last graph from yesterday, of real manufacturing and trade sales through March, which declined -0.3% from their all time high in February:
After a post-tariff pause last year, real sales have resumed their strong upward trend this year.
And there is every sign that the trend is going to continue at least for a few more months, because the short leading indicator of durable goods new orders increased a whopping 7.9% in April alone, and the second biggest monthly gain since the pandemic, to a new all-time high. Although core capital goods orders did decline-0.8% for the month, it was only eclipsed by March’s all time high as well:
And beyond that, yesterday’s second report on Q1 GDP included corporate profits, a long leading indicator. Excluding inventories and capital consumption, real inflation adjusted profits increased 3.3% in Q1, although including those adjustments they declined -0.4%:
But on a YoY basis, either way they were higher by over 10%:
Typically real corporate profits peak one year or more before a recession.
In summary, if consumers are teetering on the cusp of a recessonary contraction, producers are doing just fine, thank you. For now, anyway.