Real consumption likely rebounded more than +4% annualized in 16Q2. Continuing income gains should deliver healthy cons. growth in 16H2.


Retail sales posted their third straight solid gain in June. The Advance GDP report in two weeks should show that real consumption grew at its fastest pace in a decade, up +4.4% annualized in 16Q2. With the non-farm inventory change component subtracting almost -1%, we expect that real GDP growth was about +2.25%. (Note, as usual at this time of year, the Advance report will incorporate the annual GDP benchmark; no significant changes to the history are expected). Given the tepid results in 16Q1, consumption appears to be trending near +3%; FMI expects this pace to be sustained into 2017, fueled by healthy jobs gains and the pick-up in wages growth. With the inventory correction largely complete, inventories should be a neutral factor going forward. The rest of the today’s June data was status quo. Manufacturing remains in the doldrums, but there are some hopeful signs. Mining has stopped its freefall. And inflation is a lot closer to the +2% target than the Fed is willing to admit.

About Michael Lewis

Michael Lewis

Mike Lewis founded Free Market Inc. (FMI) in 1982 as a full-service economic consulting firm, providing insights and in-depth data analysis primarily for institutional money managers and corporate planning directors.

FMI has compiled a solid record of timely, independent and accurate economic forecasts.  FMI blends its unique analysis of indicators and experience with economic cycles into a consistent overall outlook. They offer both a comprehensive overview and in-depth detail that enable clients to integrate FMI’s insights into their decision-making process.

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