Economic forecasts are essentially unchanged, according to the Philadelphia Fed’s November Survey of Professional Forecasters released today, which is the primary macro-economic source used by MAGNA to predict advertising spending. It’s important to notice that the survey was actually run just before the election of Donald Trump.
Real GDP growth is expected to be only +1.5% this year, the same growth predicted back in August. That compares with +2.6% last year (2015). This year’s economic growth looks like the weakest since the recession in 2009, but it was still strong enough to fuel the continued job market recovery: unemployment down to 4.9% at end October. After a weak first half, the economy is actually doing well in the second half: real GDP grew by +2.9% in 3Q16 and is expected to grow by +2.2% in 4Q16.
2017 Real GDP was also left unchanged by the new SPF forecasts at +2.2%. Expectations for industrial production (+1.7%), has now been reduced for the third straight quarter by forecasters on continued weakness in utilities and a lack of strength in the manufacturing and mining sectors. Industrial production is however the lesser of the two macro indicators that typically correlate to advertising spend in the United States. The main one (Personal Consumption, a precursor to retail sales) was left unchanged at +4.7%, which is good news for consumer brands and advertising expenditure.
It’s important to notice that this new forecast is based on a survey of economists run before the Presidential election on November 8th.
The Trump election, that initially rattled global markets, has since caused the Dow Jones to hit record highs, and caused bond yields to increase – a sign of higher growth and inflation expectation in the future – under the assumption that Trump will invest in infrastructure and deregulate business and banking. Technology stocks took a minor hit though, due to concerns about a trade war with China and new restrictions on tech companies hiring overseas talent.
The next Philadelphia Fed survey will be released half way through the first quarter of 2017 in February, and will give us our first glimpse of what forecasters expect long term, factoring in a Trump Presidency.