SHI 07.04.18 Fireworks Galore
DO NOT OPEN LINK
July 4, 2018
SHI 07.11.18 Will the FED Quit Early?
July 11, 2018
“First, an apology.”
In the future, I suggest you use the blog notification email as a notification only. I suggest you open the blog post at the SteakHouseIndex website: https://www.steakhouseindex.com/ The site is much nicer, and easier to read, than the email link.
Back to today’s REAL blog! 🙂 There is no rest for the weary. Today is America’s birthday, July 4th, but here I am slaving away at my blog. But have no fear: I know there’s a hotdog and some apple pie somewhere in my future. And perhaps some fireworks. Speaking of fireworks, beyond the excitement this morning, in last week’s blog I had commented, “… the Atlanta FED is forecasting smokin-hot GDP growth for Q2: 4.5% in their latest GDPNow reading from earlier today. On the other hand, the SHI10 is predicting solid, but more tepid, growth, likely in the 2s…” and just 2 days later their forecast plummeted! They revised it downward by .7%. Why? Weak consumer spending figures! Ahh HA! Vindication is ours, my SHI10 buddy! Expensive steak and baked potatoes apparently DO tell the real story!
Well, maybe. Monday, the Atlanta FED raised their Q2 GDP growth forecast back up to 4.1%. They felt PCE recovered a bit … and equipment purchases are showing promise. Perhaps…but as today is a day of eating, drinking and celebration, let’s waste no further time and find out if our steakhouses are any busier this weekend.
Welcome to this week’s Steak House Index update.
If you are new to my blog, or you need a refresher on the SHI10, or its objective and methodology, I suggest you open and read the original BLOG: https://www.steakhouseindex.com/move-over-big-mac-index-here-comes-the-steak-house-index/
Why You Should Care: The US economy and US dollar are the bedrock of the world’s economy. This has been the case for decades … and will continue to be true for years to come.
Is the US economy expanding or contracting?
According to the IMF (the ‘International Monetary Fund’), the world’s annual GDP is almost $80 trillion today. US ‘current dollar’ GDP almost reached $20 trillion during Q1, 2018. We remain about 25% of global GDP. Other than China — a distant second at around $11 trillion — the GDP of no other country is close. The objective of the SHI10 and this blog is simple: To predict US GDP movement ahead of official economic releases — an important objective since BEA (the ‘Bureau of Economic Analysis’) gross domestic product data is outdated the day it’s released. Historically, ‘personal consumption expenditures,’ or PCE, has been the largest component of US GDP growth — typically about 2/3 of all GDP growth. In fact, the majority of all GDP increases (or declines) usually results from (increases or decreases in) consumer spending. Consumer spending is clearly a critical financial metric. In all likelihood, the most important financial metric. The Steak House Index focuses right here … on the “consumer spending” metric. I intend the SHI10 is to be predictive, anticipating where the economy is going – not where it’s been.
Taking action: Keep up with this weekly BLOG update. Not only will we cover the SHI and SHI10, but we’ll explore related items of economic importance.
If the SHI10 index moves appreciably -– either showing massive improvement or significant declines –- indicating growing economic strength or a potential recession, we’ll discuss possible actions at that time.
The BLOG:
“Personal Consumption Expendatures” (PCE) do appear to be decelerating. People are buying less stuff. We’re seeing the same pattern in the SHI10. Take a look at the chart below. As last year ended, Y-O-Y growth in PCE was almost 2.9%. By May of 2018, the growth rate had slid to 2.28%. The Atlanta FED ‘GDPNow‘ estimate suggests even further decay.
Which begs the question, “If 70% of GDP growth is driven by consumer spending, how can Q2 GDP growth exceed 4% if people aren’t spending as much as they were before?” A great question to be sure. Remember that our GDP is the sum of four (4) components. While consumption represents almost 70% of all US GDP activity, even if consumption falls, the US can still enjoy robust GDP growth. For short periods, anyway. Eventually, weakening consumer consumption will pull down GDP growth.
Consumers are the engine of the American economy. And if consumption falls enough, our economy can even slide into a recession. Rest assured, I see no danger of this now. Yes, consumer consumption is trending downward. As both the St. Louis chart above and the SHI10 have suggested. But both can change trajectory at any time. Let’s see if the SHI10 reading has improved.
A bit. This week the SHI10 is a negative (155), improved slightly from last week’s very low reading of a negative (184).
But I have to apologize again: I’m unable to upload any images. I’ll work to get this fixed … but for now, I cannot upload the SHI charts.
It’s worth mentioning that according to the OpenTable.com website, ‘Gibsons‘ in Chicago has been booked 184 times today. This accounts for their full-up status. On the other hand, the site states ‘Mortons‘ has been booked only 5 times today. Which accounts for their fully available status. ‘Mastros‘ daily booking tally was right in the middle at 84.
Sorry for all the snafus. Perhaps I should have titled this blog, “Fun in Cyberspace.” Not so much.
– Terry Liebman
