Douglas R. Terry

Outside of the pandemic defined as 2020 and 2021, this past quarter was the 5th best quarter for nominal GDP in the last 25 years.

Outside of the pandemic defined as 2020 and 2021, this past quarter was the 5th best quarter for nominal GDP in the last 25 years.

What's more pertinent? The index jumped 14% this month. The index has been in an uptrend for the last 18 months.

The labor market is softening, but still strong. More By This Author: Macro: ISM Mfg PMI — 47.4 Macro: Major Reports Holiday Week

The economic backdrop today: Employment is strong Employment drives personal consumption

Personal consumption of services is 45% of US GDP. Employment is strong and the service sector continues to be strong. S&P Global PMI report came in at an expansionary 51.4. Output rose for the 3rd straight month and at the sharpest rate since July. New orders rose at the fastest rate since June. This translated into employment clocking in at a 6th month high.

The index is down from 52.7% in November to 50.6% in December. While current activity registered a jump to 56.6% from 55.1%, the composite is being held down by employment, inventories, trade and new orders.

The spread between the 10-year and the 30-year mortgage is starting to normalize. If this continues and mortgage rates keep coming down, housing could turn soon and start adding to GDP:

The post-COVID economy has been a difficult one to navigate because no one has ever experienced anything like it. The services and goods sides of the economy have been out of sync since the onset of COVID. Before the economy was fully re-opened, the goods side of the economy boomed, even as supply chain issues caused shortages and rapidly rising prices. As the economy re-opened with the introduction of vaccines, services started to expand rapidly as goods consumption fell back. The pullback in goods consumption was exacerbated at the manufacturing and wholesale level by a build up of inventories. Many goods were double or triple ordered to make sure stores had sufficient stock and once supply chains healed, all those extra orders were filled. The result was a build up of inventories that filled warehouses. The manufacturing part of the economy had to slow as those inventories were worked down and it did.

We've had an economic boom of investment in AI, manufacturing and infrastructure over the past 18 months. Secular trends like electrification, AI, a space based economy are real. Valuations for compan