The first (advanced) estimate of U.S. GDP for the fourth quarter showed the U.S. economy growing at a 2.6% annual rate. Economists surveyed by Briefing.com had forecast 2.3% growth. For all of 2018 the economy grew at a real rate (that is after inflation) of 2.9% in 2018 versus the 2.2% real growth in 2017. From these numbers, this doesn’t look like an economy on the edge of a recession–even if investors can still count on a drop in earnings for the Standard & Poor’s 500 in the first quarter of 2019–and quite probably in the second and third quarters as well.
The numbers out of China today weren’t nearly as strong. In fact, they were bad. Not quite terrible but pointing that way. The official Purchasing Managers’ Index (PMI) for manufacturing fell to 49.2 in February from 49.5 in January, according to the National Bureau of Statistics. Anything below 50 in this index signals contraction so this is the third straight month pointing to contraction in the economy. Analysts surveyed by Reuters had forecast that the manufacturing index would remain unchanged in February.
Manufacturing output fell in February for the first time since January 2009, during the depths of the global crisis. This sub-index dropped to 49.5 from 50.9 in January. Manufacturing companies cut jobs at the fastest pace since December 2015. New export orders shrank for a ninth straight month with that sub-index dropping to 45.2, the lowest since February 2009, from 46.9 in January.
The only good news came from total new orders — an indicator of future activity — which edged back into expansion territory. The climb to 50.6 from 49.6 suggested that domestic demand might be improving.