Forecasts, Sales, and Deliveries (Oh My)
Editor’s Note: It’s that day again…
Let’s get to it!
IMF Forecasts a “Soft Landing,” Global GDP Growth
Yesterday, the International Monetary Fund (IMF) upped its forecast for global growth in 2024, citing a “surprisingly resilient” world economy despite widespread inflation.
The IMF now expects the world’s gross domestic product (GDP) to rise by 3.2% this year, a 0.1 percentage point uptick from its January forecast. The organization expects the same rate of GDP growth in 2025.
According to IMF Chief Economist Pierre-Olivier Gourinchas, the global economy is headed for the “soft landing” our homegrown Federal Reserve has so long hoped for: a return to “regular” inflation rates without plunging into recession.
“Despite gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose,” Gourinchas wrote in an IMF blog post.
According to the IMF, yet again, developed and “advanced” economies are expected to see the greatest amount of growth. The estimates for major emerging economies such as China are a bit more muted — according to the IMF, China’s economic woes could hamper growth among its trade partners.
The group expects global headline inflation to drop from an average of 6.8% in 2023 to 5.9% in 2024. Next year, inflation is expected to rise at a pace of only 2025, with the U.S. and other developed economies expected to hit their inflation targets sooner than their emerging counterparts.
Of course, the IMF noted that central banks such as the U.S.’s Federal Reserve still have their work cut out for them.
“As the global economy approaches a soft landing, the near-term priority for central banks is to ensure that inflation touches down smoothly, by neither easing policies prematurely nor delaying too long and causing target undershoots,” Gourinchas said.
“At the same time, as central banks take a less restrictive stance, a renewed focus on implementing medium-term fiscal consolidation to rebuild room for budgetary maneuver and priority investments, and to ensure debt sustainability, is in order.”
Zooming out, the IMF’s forecast isn’t all roses and sunshine. In fact, the organization’s five-year forecast of 3.1% global GDP growth is the lowest estimate given in decades.
Still, the IMF is projecting U.S. GDP to grow at double the pace of all other G7 countries this year. U.S. growth is forecast at 2.7%. By comparison, the G7 country with the next-highest expected growth rate is Canada, at 1.2%. And Germany is expected to grow by only 0.2%.
Retail Sales Beat Expectations for March
Never underestimate the American consumer.
That’s the message the U.S. Commerce Department sent on Monday when it announced retail sales rose much higher in March than expected.
Retail sales rose 0.7% for the month, according to the department’s Census Bureau. That’s considerably higher than the 0.3% increase Dow Jones economists had expected. However, it is below the upwardly revised 0.9% growth noted in February.
At the same time that retail sales were on the rise, the Labor Department’s Consumer Price Index (CPI) rose by 0.4%. This means that consumers more than kept up with inflation last month.
Anyway, regarding the retail report, excluding automobile-related sales, sales rose 1.1% in March, far above the estimate of 0.5%. And “core” retail, which strips out sales for several volatile items, rose by 1.1%. This is the metric used in calculating the country’s gross domestic product (GDP).
So it’s safe to say we’re not headed for a recession in the near future. A recession is popularly defined as two quarters of negative GDP growth.
The U.S. economy counts on consumers to get out there and spend; roughly 70% of the U.S.’s economic output comes from retail sales.
The biggest sales growth was online last month. E-commerce sales rose by 2.7%. Meanwhile, sales at gas stations rose by 2.1% — to be expected, given rising fuel costs.
There were also a few categories that saw sales dropoffs. Sales of sporting goods, hobby supplies, musical instruments, and books dropped by 1.8%. Clothing store sales decreased by 1.6%, and electronics and appliances retailers saw a 1.2% decline.
“Strong sales growth in March salvaged an otherwise mediocre quarter for retailers,” Plante Moran Financial Advisors’ Jim Baird told CNBC yesterday. “[First-quarter] growth isn’t going to generate a round of high fives, but closing out the quarter on a strong note should allow them to breathe a sigh of relief and [give them] a glimmer of hope that momentum could carry through into the coming months.”
From the “Things That Make You Go ‘Hmmm'” Department…
So far this year, Tesla (NSDQ: TSLA) has underperformed the rest of the so-called “Magnificent Seven” stocks — Alphabet (NSDQ: GOOGL), Amazon (NSDQ: AMZN), Apple (NSDQ: AAPL), Meta Platforms (NSDQ: META), Microsoft (NSDQ: MSFT), and Nvidia (NSDQ: NVDA).
Year to date, Tesla’s stock has lost more than 35% of its value… and shares are slipping further this week after the electric vehicle (EV) maker announced it would lay off more than 10% of its staff.
Now, typically, layoff announcements don’t cause shares to tank. After all, Wall Street typically rewards companies for boosting profits and streamlining operations.
However, Tesla’s announcement that it will lay off roughly 15,000 employees doesn’t bode particularly well for the company given concerns about reduced demand for Tesla’s pricey EVs.
Earlier in April, Tesla announced its first year-over-year decline in vehicle deliveries since 2020, when the COVID pandemic played havoc with supply chains. That’s largely thanks to fierce competition in China, Tesla’s second-largest market.
There, domestic EV makers such as BYD (OTCMKTS: BYDDY) and Xiaomi (OTCMKTS: XIACF) — originally a cellphone company — are chipping away at Tesla’s market share.
That has led Tesla to engage in a pricing war.
According to Kelley Blue Book, EV prices in March were 9.7% lower on a year-over-year thanks to “strong incentive packages.”
Although Tesla’s controversial CEO, Elon Musk, has tried to paint the current layoff round as a routine procedure for “cost reductions and increased productivity,” analysts are skeptical.
“Just when you think the news couldn’t get any worse for Tesla, we have EV demand questions that have been popping up over the last few quarters,” Deepwater Asset Management’s Doug Clinton told CNBC this week.
When Will the SSA Reserve Run Out?
According to the annual OASDI (Old-Age, Survivors, and Disability Insurance) trustees report from the Social Security Administration, under the current circumstances, the program’s asset reserve could be depleted as soon as 2034 — or 2031, if the administration takes on a high volume of costs.
However, if the administration were to significantly curb its expenditures, the reserve fund could stay solvent until 2066.
Take a look:
<a href=”https://www.statista.com/chart/25684/social-security-asset-fund/” title=”Infographic: When Is the Social Security Trust Fund Running Out? | Statista”><img src=”https://cdn.statcdn.com/Infographic/images/normal/25684.jpeg” alt=”Infographic: When Is the Social Security Trust Fund Running Out? | Statista” width=”100%” height=”auto” style=”width: 100%; height: auto !important; max-width:960px;-ms-interpolation-mode: bicubic;”/></a> <em>You will find more infographics at <a href=”https://www.statista.com/chartoftheday/“>Statista</a></em>
Part of the problem is that more Americans are retiring while fewer babies are being born in the U.S. That creates an imbalance between the workers funding Social Security and those who are receiving benefits.
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