The recent release of second quarter GDP growth came in below WSJ expectations as well as a downward revision of first quarter growth (from 1.4 to 1.2). This new data follows weak inflation numbers from last week.
1. For the past two years expectations exhibit an upward bias. Which, if that bias holds true, means low future expected growth would indicate even lower actual growth. Projected growth in 2018 is 2.38 percent, and 1.94 percent in 2019. These are significantly below the administrations overly optimistic 3 percent promise.
2. Expected federal funds rates have been falling since the beginning of the year. Not by a lot, but it has been consistent, suggesting that new data will give the Fed pause in increasing their target rates.
3. Expected housing starts continue to fall. At the beginning of 2016 expected housing starts were quite robust, however, subsequent data have curtailed consensus optimism. If this expectation falls below 1200, that could be a signal the beginnings of a slow down in the housing market.
While there some signs of growth remain, these three sets of expectations should worry investors and the current administration. All indicate at the very least, that the economy will not grow particularly quickly in the coming year. In the worst case scenario we may see the beginnings of a recession by the end of 2018.