Best of the Week
Most Popular
1. Crude Oil and Water: How Climate Change is Threatening our Two Most Precious Commodities - Richard_Mills
2.The Potential $54 Trillion Cost Of The Fed's Planned Interest Rate Increases - Dan_Amerman
3.Best Cash ISA Savings for Rising UK Interest Rates and High Inflation - March 2018 - Nadeem_Walayat
4.Fed Interest Hikes, US Dollar, and Gold - Zeal_LLC
5.What Happens Next after February’s Stock Market Selloff - Troy_Bombardia
6.The 'Beast from the East' UK Extreme Snow Weather - Sheffield Day 2 - N_Walayat
7.Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’ - MoneyMetals
8.Significant Decline In Stocks On The Cards! -Enda_Glynn
9.Land Rover Discovery Sport Extreme Driving "Beast from the East" Snow Weather Test - N_Walayat
10.SILVER Large Specualtors Net Short Position 15 Year Anniversary - Clive_Maund
Last 7 days
Larry Kudlow vs. Vladimir Putin on Gold - 21st Mar 18
Trump Builds Economy and War Machine - 21st Mar 18
This Stock Market "Illusion" Can Destroy Once-Vibrant Portfolios - 21st Mar 18
Gold Short-term Pull Back in Progress - 20th Mar 18
Stocks Appear to be Under Pressure - 20th Mar 18
Time To Eliminate Your Wall Street Tax? - 20th Mar 18
The Beast from the East Snow, UK Roads Driving Car Accidents - 20th Mar 18
Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - 19th Mar 18
2018 Reversal Dates for Gold, Silver and Gold Stocks - 19th Mar 18
This Tech Breakthrough Could Save The Electric Car Market - 19th Mar 18
Stocks Set to Open Lower, Should You Buy? - 19th Mar 18
The Wealth Machine That Rising Interest Rates Create Conflict With The National Debt - 19th Mar 18
Affiliate Marketing Tips and Network Recommendations - 19th Mar 18
Do Stocks Bull Market Tops Need Breadth Divergences? - 19th Mar 18
Doritos Instant £500 Win! Why Super Market Shelves are Empty - 19th Mar 18
Bonds, Inflation & the Market Amigos - 19th Mar 18
US Housing Real Estate Market and Banking Pressures Are Building - 19th Mar 18
Stock Market Bulls Last Stand? - 18th Mar 18
Putin Flip-Flops Like A Drunken Whore On Bitcoin Cryptocurrency Legalization - 18th Mar 18
How to Legally Manipulate Interest Rates - 18th Mar 18
Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - 18th Mar 18
Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - 17th Mar 18
Strong Earnings Growth is Bullish for Stocks - 17th Mar 18
The War on the Post Office - 17th Mar 18
GDX Gold Mining Stocks Fundamentals - 16th Mar 18
Nationalism, Not the Russians, got Trump Elected - 16th Mar 18
Has Bitcoin Bought It? - 16th Mar 18
Crude Oil Price – Who Wants the Triangle? - 16th Mar 18
PayPal Cease Trading Crypto Currency Bitcoin Warning Email Sophisticated Fake Scam? - 16th Mar 18
EUR/USD – Something Old, Something New and… Something Blue - 16th Mar 18
DasCoin: A 5-Minute Guide to How It Works - 15th Mar 18
Stock Market Downward Pressure Mounting - 15th Mar 18
The Stock Market Trend is Your Friend ’til the Very End - 15th Mar 18
6 Easy Ways to Get What Women Want, for Less! - 15th Mar 18
This Isn’t Your Grandfather’s (1960s) Inflation Scare - 15th Mar 18
Eye Opening Stock Market Index, Volatility, Charts and Predictions - 15th Mar 18
Gold Cup At Cheltenham – Gold Is For Winners, Not For Gamblers - 15th Mar 18
Upcoming Turnaround in Gold - 14th Mar 18
Will the Stock Market Make Another Correction this Year? - 14th Mar 18
4 Ways To Writing An Interesting Education Research Paper - 14th Mar 18
China Toward Sustainable Economic Growth - 14th Mar 18
Stock Market Direction Is No Longer Important - 14th Mar 18
Trade Tariffs Defeat Globalists and Return Prosperity - 14th Mar 18
Stock Market Crash is Underway and Cannot be Stopped! - 14th Mar 18
Are Energy Sector Stocks Bottoming? - 14th Mar 18
Nasdaq Stocks Soars to New Record High After Strong Job Reports - 14th Mar 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Small Business Survey Says… Ignore the Hard Data at Your Peril

Economics / US Economy Mar 20, 2017 - 04:07 PM GMT

By: Michael_Pento

Economics Surveys of both consumers and businesses show there is an extreme level of confidence regarding future GDP growth. Consumer confidence is now at its highest level since 2001. Small and medium-sized business owners, the driving force of growth in the economy, appear downright giddy; as the NFIB Small Business Optimism Index recently soared to its highest level since 2004.

The Philly Fed Index, a survey that gauges how well manufacturers are feeling, hit its highest level since 1984. Business leaders are betting on tax cuts, infrastructure spending and a scale-back of onerous regulations that will, hopefully, make America great again!

But just as we were beginning to get tired of all this “winning”, investors are also receiving a strong reality check from the actual hard data regarding the current state of economic activity.

The economy slowed more than expected in the fourth quarter of 2016. Gross domestic product increased at a lackluster 1.9 percent annual rate at the end of last year. For all of 2016, the economy grew only 1.6 percent, which was the weakest pace since 2011.

And despite all the good feelings about the current state of affairs, the Atlanta Fed’s GDPNow model, is forecasting real GDP growth (at a seasonally adjusted annual rate) in the first quarter of 2017 to come in at a pitiful 0.9 percent.

The hype regarding the potential implementation of Trumponomics appears to be creating a trenchant gap between today’s economic reality and hope about the future.

More evidence of this gap can be found in the January Durable Goods Report, which met expectations at 1.8 percent. However, excluding aircraft, transportation equipment fell 0.2 percent, well below the estimate of a 0.2 percent gain. Core capital goods showed a 0.4 percent decline in orders. This ends 3 months of strength for this reading and dispels the hope for a first quarter business investment boom suggested by the business confidence readings.  Unfilled orders were down 0.4 percent and have now fallen in 7 of the last 8 months--the deepest contraction since the Great Recession.

And we may need to start working on that wall right away if investors are to believe that confidence surveys will catch up with reality. Construction spending fell a sharp 1.0 percent in January. The consensus was for construction spending to increase 0.6 percent.

Personal spending increased only 0.2 percent in January, one-tenth below the consensus. This brings into question whether upbeat consumers are putting their money where their mouths are. Inflation-adjusted spending fell 0.3 percent, the largest drop since September 2009.

Also, Industrial Production for the month of February registered a big fat zero percent growth rate.

And how do you explain the recent drop in the CRB Index?  An economy that is rapidly expanding should see a rise in commodity prices. However, in the week of March 6th; oil price dropped 8%, copper dropped 3.3%, and iron ore dropped 5%. This key growth index is down about 7% since the start of the year and has lost over a third of its value since 2014.

In addition, the latest data on department store and retail sales is alarming. Retail sales increased by just 0.1% in February, which was the smallest gain in the past 6 months. And Zerohedge reported that Bank of America data shows February department store sales fell about 15% yoy—the largest drop on record.

Yet despite any real evidence of actual economic growth, we have a stock market trading at all-time highs and a Fed that is determined to slam the brakes on “runaway” 0.9% growth.  The Republicans in congress are in a battle with Democrats and Libertarians over raising the debt ceiling; and they can’t seem to get out of their own way on health care and tax reform.

Hopefully, these employment and survey anecdotes are leading economic indicators that will turn out to have foreshadowed a leg up in GDP growth. Or, they could end up being the fleeting hiccups of hope in the new President that will end up sinking in the mire of D.C. politics. If the latter case proves to be correct, survey anecdotes will soon reconcile with the persistent anemic path of a sub-par and grossly-injured economy that has been beset by asset bubbles and debt.

The stock market has priced in perfection coming from the new Administration. Unless the Donald can put some tax and regulatory meat on the bones very soon, the stock market should suffer a huge fall.

Michael Pento produces the weekly podcast “The Mid-week Reality Check”, is the President and Founder of Pento Portfolio Strategies and Author of the book “The Coming Bond Market Collapse.”


Michael Pento
Pento Portfolio Strategies

Twitter@ michaelpento1
(O) 732-203-1333
(M) 732- 213-1295

Michael Pento is the President and Founder of Pento Portfolio Strategies (PPS). PPS is a Registered Investment Advisory Firm that provides money management services and research for individual and institutional clients.

Michael is a well-established specialist in markets and economics and a regular guest on CNBC, CNN, Bloomberg, FOX Business News and other international media outlets. His market analysis can also be read in most major financial publications, including the Wall Street Journal. He also acts as a Financial Columnist for Forbes, Contributor to and is a blogger at the Huffington Post.
Prior to starting PPS, Michael served as a senior economist and vice president of the managed products division of Euro Pacific Capital. There, he also led an external sales division that marketed their managed products to outside broker-dealers and registered investment advisors. 
Additionally, Michael has worked at an investment advisory firm where he helped create ETFs and UITs that were sold throughout Wall Street.  Earlier in his career he spent two years on the floor of the New York Stock Exchange.  He has carried series 7, 63, 65, 55 and Life and Health Insurance www.earthoflight.caLicenses. Michael Pento graduated from Rowan University in 1991.

© 2017 Copyright Michael Pento - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Pento Archive

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules