We are unsure if the 18th century English poet Alexander Pope had a forecast of the economic or meteorological outlook of Great Britain when he proclaimed “hope springs eternal” in his 1734 work An Essay on Man that explored the natural order of things and attempted to connect mankind with the divine. Our continuing exploration of the economic order of things may not be connected to the divine, but does show some signs of hope as spring begins with recently improving economic data.
The latest Chicago Fed National Activity Index report, one of our favorite broad leading economic indicators and a gauge of the level of economic activity in the U.S., came in better than expected, and, over the last few months, the index has averaged levels that are consistent with 2.5% real GDP (gross domestic product) growth despite distortions to the macroeconomic data by extreme winter weather, according to MKM’s Chief Economist & Market Strategist Michael Darda.
Another favorite leading economic indicator, the Markit Composite Purchasing Managers Index (PMI; a monthly economic survey of select companies and their forward views on output, new orders, employment, and prices) moved higher this month and continues to signal broad economic expansion.
Adding these data points to an improving labor market (see "On Jobs"), accommodative financial conditions (see "On the Impact of Weather & Emerging Markets on the U.S. Economy"), and a good outlook for capital spending (see "On the Perceived Lack of Capital Spending, Revisited") gives us hope.
But of course let us not forget some practical advice from Pope: “Blessed is he who expects nothing, for he shall never be disappointed.”
Wise words indeed for hopeful economic prognosticators like us.
Sources: MKM Partners | Alexander Pope | Markit | The Chicago Federal Reserve Bank
*Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index.