The bear market entered its sixth month and conflicting signals of strength and weakness in the economy stood out this past week.
Friday morning’s release of the U.S. Index of Leading Economic Indicators marked this key economic indicator’s eighth straight monthly decline, and Thursday’s housing starts release marked its ninth consecutive monthly decline. These are ominous signs.
However, retail sales, excluding gasoline because its price is so volatile it distorts the picture, shot up +7.9% in the 12 months through the end of October. In October alone, retail sales surged 1.3%, a clear sign of strength. Additional strength was signaled in Thursday’s GDPNow estimate for real GDP growth in the fourth quarter of 2022 of +4.2% -- much higher than the consensus of leading economists.
The +4.2% seasonally adjusted annual growth rate estimate is a running estimate of what’s happening now in the economy based on an algorithm devised by the Federal Reserve Bank of Atlanta. The model is designed to grow more accurate as more data is released each quarter and its estimates have been wildly inaccurate many times in recent years. However, in recent months, the GDPNow growth forecast has been more accurate than the forecasts from leading economists.
The S&P 500 stock index closed Friday at 3,965.34 gaining +0.48% from Thursday, and down -0.69% from a week ago. The index is up +77.22% from the March 23, 2020 bear market low and -17.32% lower than its January 3rd all-time high.
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