Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       

Blog Home
   Brian Wesbury
Chief Economist
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
X •  LinkedIn
  Soft Patch Already Fading
Posted Under: Monday Morning Outlook
For the record, in our professional lives, we don't really care that much about Republicans or Democrats.  Our constituency is the investor.  But everything is politicized.  Conservatives get mad at us because we are optimistic about the economy – they want to say Obama is hurting it.  Liberals get mad because we think investors are better served by a much smaller government – they want a bigger one.

We are in "no-man's-land," taking fire from both sides.  Some argue the end of stimulus is certain death for the economy.  Others argue government growth is causing the next great depression.  Anyone in the middle (like us), that says, "yes, the economy would be more robust (and unemployment lower) if we had less government, but, the US economy is still growing anyway" is a target for politicized anger.

And now that a "Soft Patch" in economic data and some softness in stock prices have developed, the political rhetoric has ramped up.  We think it's all temporary, but that suits almost no one in the political sphere.  Investors who let politics interfere with their economic or investing thought-process are making a grave mistake.  We think the pessimism is overdone and this is a great buying opportunity.

Take a deep breath and start looking for signs of economic life.  Start looking at Calafia Beach Pundit, a blog written by a fabulous economist, Scott Grannis.  Scott has been optimistic for the past two years and recently highlighted commercial and industrial lending, what he calls "a good measure of bank lending to small and medium-sized businesses."  These loans expanded for the seventh straight month in May and are up 12.2% at an annual rate in the past three months.

How about tax receipts?  Up 19.2% in May compared to a year ago, despite a cut in payroll tax rates.  Net individual income tax payments were up 55% versus May 2010 – a burst due to a sharp rise in "non-withheld" payments (final settlement for taxes owed for 2010).  But, according to the Congressional Budget Office, withheld receipts – for income and payroll taxes combined – were still up 10% versus a year ago.

Meanwhile, exports hit a record high in April, up 18.8% versus year-ago levels.  And aggregate hours worked (total employment times the length of the workweek) are up 3.5% at an annual rate during the three months ending in May.  Commercial construction expanded for the third straight month in April.  And this week, we'll get a key report on May retail sales.  Weak auto sales will drag the top-line number down, but chain store sales were up in May and we expect ex-auto retail sales to be up about 8% above May 2010 levels.

None of this fits the dour, and politically-hyped, forecasts of economic Armageddon so prevalent these days.  The soft patch is nothing more than a temporary and superficial blow to the economy.  If it was anything more than Japan's disasters and the tornado season, the good numbers we've been seeing lately – on lending, tax revenue, trade, hours-worked, ex-auto sales, and commercial building – wouldn't be happening.

Click here for the entire report.
Posted on Monday, June 13, 2011 @ 10:54 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.