{"id":7941,"date":"2019-03-04T19:56:43","date_gmt":"2019-03-04T19:56:43","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=7941"},"modified":"2022-02-26T13:07:22","modified_gmt":"2022-02-26T13:07:22","slug":"distinguishing-between-weak-growth-and-negative-growth","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/distinguishing-between-weak-growth-and-negative-growth\/","title":{"rendered":"Distinguishing between weak growth and negative growth"},"content":{"rendered":"\n<p><strong>Is the U.S. Economy\nShowing Real Signs of Weakness?<\/strong><\/p>\n\n\n\n<p>I\u2019ve noticed recently that many economists and \u2018experts\u2019 appear to be resetting their expectations for when the U.S. economy might enter a recession. Many now seem to believe it could happen as soon as this year, and some are citing a host of economic data that appears to show a U.S. economy weakening on many fronts. \u00a0<\/p>\n\n\n\n<p>One\nof the major causes of concern came from weak data in the biggest contributor\nto overall U.S. GDP: consumer spending. Since the current U.S. economic\nexpansion began in 2009, retail sales have risen an average of 0.4%. That\u2019s why it came as a shock to Wall Street\nwhen government data showed that retail sales <em>fell<\/em> -1.2% month-over-month in December, which is typically a sturdy\nmonth for consumer spending.<sup>1<\/sup> <\/p>\n\n\n\n<p>It\nwas the largest retail sales drop since September 2009, and it was widely\nunexpected. Consensus estimates were forecasting a modest, but still positive +0.1%\nincrease in retail sales for the month. To make matters more troubling, the\nweakness in retail sales appeared to be broad-based: sporting goods stores sales dropped -4.9%, department stores\nfell -3.3%, and non-store retailers (which includes e-commerce) declined -3.9%.\nmiscellaneous store retailers fell <\/p>\n\n\n\n<p>-4.1%, non-store retailers \u2014\nwhich includes online retailers \u2014 dropped 3.9%.<sup>2<\/sup><\/p>\n\n\n\n<p>___________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_3-3&amp;content=stock_market_outlook_report \">Prepare for a Potential Recession with our Stock Market Outlook Report<\/a><\/strong><\/p>\n\n\n\n<p>Do not\nlet fears of a potential recession force you to make hasty investment\ndecisions; instead, keep your eye on critical economic indicators with our\nStock Market Outlook Report.<\/p>\n\n\n\n<p>This\nreport will provide you with our forecasts along with additional factors to\nconsider:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Will 2019 stay bullish?<\/em><\/li><li><em>Zacks global markets\u2019 outlook<\/em><\/li><li><em>What sectors&nbsp;show the best opportunity?<\/em><\/li><li><em>What industries within those sectors most merit your\n     attention?<\/em><\/li><li><em>Forecast for the S&amp;P<\/em><\/li><li><em>Small-cap vs. large-cap returns<\/em><\/li><li><em>And much more.&nbsp;<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!<br> <br><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_3-3&amp;content=stock_market_outlook_report \"> <\/a><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_3-3&amp;content=stock_market_outlook_report \">IT&#8217;S FREE. Download the Just-Released\u00a0Stock Market Outlook<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_3-3&amp;content=stock_market_outlook_report \">3<\/a>\u00a0<\/sup><\/strong><\/p>\n\n\n\n<p>____________________________________________________________________<\/p>\n\n\n\n<p>Attention also shifted to declining U.S. home sales, which registered a -6.4% drop in December to fall to their lowest level in three years.<sup>4<\/sup> The Conference Board\u2019s Leading Economic Indicator (LEI) index, which has historically been a reliable barometer of U.S. economic activity, also reported a decrease of -0.1%.<sup>5<\/sup> <\/p>\n\n\n\n<p>But perhaps the most\nnotable and real cause of concern came in the arena of U.S. corporate earnings.\nCorporations steadily issued negative revisions to earnings estimates for the current\nand coming quarters, which have left growth expectations for the first half of\n2019 barely in positive territory. This negative revision trend is a function\nof uncertainty about global economic growth, with a host of leading companies\nin different industries citing weakness in China, Europe and elsewhere as the\ndriver of weak guidance. In my view, the numbers tell a clear story:<sup>6<\/sup><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/motm_chart_03022019-1024x572.png\" alt=\"\" class=\"wp-image-7942\"\/><\/figure>\n\n\n\n<p>Taken together, all\nsigns appeared to point in a similar direction, with the implication being that\nthe U.S. economy was weakening perhaps more quickly than many anticipated. <\/p>\n\n\n\n<p><strong>Key Distinction: Weakening is not the Same as Contracting<\/strong><\/p>\n\n\n\n<p>All told, the\neconomic data may very well be telling us that the U.S. economy is weakening. <em>But for investors, weakening is not the same\nthing as contracting.<\/em> And positive economic growth in the U.S. in 2019\nappears all but assured, in my view. The Chicago Fed\u2019s Economic Activity Index\nshows steady activity and modest \u2013 but very normal \u2013 expectations for future\nGDP growth: <\/p>\n\n\n\n<p><strong><em>Source: Federal Reserve Bank of Chicago<sup>7<\/sup><\/em><\/strong><\/p>\n\n\n\n<p>Investors should also\nkeep in mind that economic data like retail and existing home sales, while\nimportant, is also quite volatile from month to month and even quarter to\nquarter. Looking back at this economic expansion alone, we can find several\ninstances when economic activity turned negative \u2013 particularly in 2015 and\n2016. If we continue seeing weak readings for the next few months or even\nquarters, we should perk up and think about the broader trend. For now,\nhowever, a couple of weak readings don\u2019t necessarily portend an end to the\nexpansion. <\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2019-03-03-MOTM-image-2-of-2.png\" alt=\"\" class=\"wp-image-7943\"\/><\/figure>\n\n\n\n<p><strong>Bottom Line for Investors<\/strong><\/p>\n\n\n\n<p>At the end of the day, some of the\nconcern over weak retail sales may be misplaced: the bureau in charge of\ncompiling retail sales data was closed in the later days of December and a\nmajority of January, when much of this data would have been processed and\nanalyzed.<sup>8<\/sup> What\u2019s more, investors should remember that government\ndata on the economy tends to be fairly volatile and is often revised several\ntimes before final numbers are released. We might reasonably expect a similar\noutcome this time around.<\/p>\n\n\n\n<p>Regardless, investors should be\ncautious not to conflate <em>weakening <\/em>economic\ndata with <em>negative <\/em>economic data. You\ncan have one without the other, with the economy still growing albeit at a more\nmodest pace. That\u2019s what I believe we\u2019ll see throughout 2019. &nbsp;<\/p>\n\n\n\n<p>Going forward, I think patience will be rewarded. So, instead of letting fears of a recession push you to make hasty investment decisions, I recommend staying focused on the long-term view, meaning focus on fundamentals instead of the daily price movements. To help you do this, I am offering all readers our <strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_3-3&amp;content=stock_market_outlook_report \">Just-Released Stock Market Outlook Report<\/a><\/strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_3-3&amp;content=stock_market_outlook_report \">. <\/a><\/p>\n\n\n\n<p>This Special\nReport is packed with newly revised predictions that can help you base your\nnext investment move on hard data. For example, you&#8217;ll discover Zacks\u2019 view on:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Will\n2019 stay bullish?<\/li><li>Zacks\nglobal markets\u2019 outlook<\/li><li>What\nsectors show the best opportunity?<\/li><li>What\nindustries within those sectors most merit your attention?<\/li><li>Forecast\nfor the S&amp;P<\/li><li>Small-cap\nvs. large-cap returns<\/li><li>And\nmuch more. <\/li><\/ul>\n\n\n\n<p>If you have\n$500,000 or more to invest and want to learn more about these forecasts, click\non the link below to get your free report today!<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_3-3&amp;content=stock_market_outlook_report \">FREE Download \u2013 Zacks&#8217; Stock Market Outlook<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_3-3&amp;content=stock_market_outlook_report \">9<\/a><\/sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_3-3&amp;content=stock_market_outlook_report \"> >><\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Is the U.S. Economy Showing Real Signs of Weakness? I\u2019ve noticed recently that many economists and \u2018experts\u2019 appear to be [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-7941","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/7941","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=7941"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/7941\/revisions"}],"predecessor-version":[{"id":10783,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/7941\/revisions\/10783"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=7941"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=7941"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=7941"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}