Introduction to the Economy
The economy has been a subject of discussion for many years, with various predictions and expectations. Recently, an article claimed that President Trump’s economic agenda would lead to an inflationary Armageddon, but the economy has been performing better than expected. Consumers’ expectations are becoming increasingly optimistic, but is this really the case?
Key Indicators
Several key indicators are moving down, which contradicts the claim that the economy is doing well. These indicators include nonfarm payroll, civilian employment, industrial production, personal income, manufacturing and trade sales, consumption, and monthly GDP. Figure 1 shows the log normalized values of these indicators, which clearly indicate a decline.
GDP and Core GDP
Dr. Antoni failed to mention GDP (or GDO) in his article, which is a crucial indicator of the economy’s performance. Although GDP has experienced distortions due to difficulties in measuring the outcomes of tariff-frontrunning, "Core GDP" has slowed down as well. This suggests that the economy is not doing as well as claimed.
Final Sales to Private Domestic Purchasers
Final sales to private domestic purchasers have also declined, which is another indicator of the economy’s performance. Figure 2 shows the stochastic trend, SPF May survey median, and Atlanta Fed nowcast of final sales, which all indicate a decline.
Expectations and Sentiment
Expectations have indeed improved, but overall sentiment still remains far below levels at the beginning of the Trump administration. Figure 3 shows the University of Michigan Economic Sentiment, Conference Board Confidence Index, and SF News Sentiment index, which all indicate that sentiment is still low.
Inflation Expectations
Inflation expectations have risen since the Trump administration’s advent, despite the claim that inflation has come down. Figure 4 shows the University of Michigan Survey of Consumers mean expected one year ahead CPI inflation, Survey of Professional Forecasters, and WSJ survey, which all indicate an increase in inflation expectations.
Recession Signal
The Conference Board’s Leading Economic Index has declined again, signaling a recession. This is a clear indicator that the economy is not doing well and that a recession may be imminent.
Conclusion
In conclusion, the economy is not performing as well as claimed. Key indicators are moving down, GDP and Core GDP have slowed down, final sales to private domestic purchasers have declined, expectations and sentiment are still low, and inflation expectations have risen. The signal of a recession from the Conference Board’s Leading Economic Index is a clear warning that the economy is in trouble. It’s time to re-evaluate the economic agenda and make necessary changes to prevent a recession.
