U.S. Economy Is Witnessing a Darker Trend in the Stock Market Right Now
As per the U.S economic figures revealed in the previous week, there has been a drop in the equities with S&P 500 being down more than 10% through Thursday. The data is uncertain so far and therefore it is difficult to arrive on conclusion from only one set of reports.
These reports direct over some trends investors need to keep a close eye on. The main trends are the increasing inflationary pressures and capacity limitations. Some of the points that need to be considered are:
In the fourth quarter, real productivity was shockingly quite weak and came down by 0.1% from the prior quarter on basis of the adjusted annual rate. The unit labor costs increased to 2.0% in spite of some moderation in the real compensation growth.
The labor market aggregate hours dropped 0.42% month-over-month in January. These correlate with the real economic output. On the other hand, average hourly earnings increased 0.3% month-over-month and soared 2.9% year-over-year which is the highest rate since 2009.
Due to the slowing supplier deliveries, the ISM Manufacturing Index toned-down less than expected. On the other hand, the new orders, production and employment indexes dripped down. Since 2011, the prices paid index has increased to the highest level.
This data has surfaced at such a time when the unemployment is below numerous estimates of the non-accelerating inflation rate of unemployment NAIRU. Over the past three decades, it has been observed more broadly that only one period with decelerating payroll growth coincided with the rising real GDP growth during the productivity boom of the late 90s.
The U.S economy is beginning to resemble an economy which is in its later stages of business cycle. The weak labor productivity report that came out last week has brought results that have raised concerns regarding whether and to what limit productivity is expected to rise in the coming year as a result of fiscal expansion.
A wide number of indicators suggest that U.S economy has grown in the second half of 2017 and the current falling of the equity markets is coherent with the historical behavior during the spans of slow growth and increasing inflation.