Daily Breitbart Economic Note -- April 29, 2021

Breitbart Business Digest, April 29, 2021, 1Q21:

U.S. economic growth picked up in the first quarter as consumers opened their digital wallets and ordered a flood of goods and increased services spending, helping to bring total output right to the edge of its pre-pandemic level. 

Gross Domestic Product growth rose to an annualized rate of 6.4 percent, with consumer spending on goods rising to a growth rate of 23.6.

It's worth pausing to reflect on how much better this was than forecasts at the end of last year. Then president-elect Joe Biden was warning of a "dark winter" ahead. 

The Fed's Jerome Powell said in a December press conference that the Fed stood ready to increase its bond purchases if the economy slowed. The consensus among blue chip economists was that first-quarter GDP would grow at just below 2 percent in the first quarter.

We now know that this pessimism was misplaced. Growth was poised to explode higher once the economy was unleashed from the shackles of lockdowns and the dread of the pandemic.

In his joint address to Congress Wednesday night, Biden did his best to claim credit for the first quarter's economic rebound. But very little of the $1.9 trillion appropriations authorized by the American Rescue Act, passed in the second week of March, were spent into the economy in the first three months of the year. The exception to this is the $1,400 direct stimulus payments, which hit bank accounts in the third week of March and later. But consumers very likely spent only a small fraction of these funds in the first quarter.

Which raises the question: what happens when all this spending hits the economy? Not just the $1.9 trillion, but also the trillions for the American Jobs Act, supposedly the infrastructure bill, and the American Families Act.

One possibility is the further acceleration that the Biden people predict. 

Another possibility is next to nothing. Consumers could pull back on spending in anticipation of higher taxes to pay for all this spending. [This will not happen; guaranteed.]

And, finally, the third possibility is liftoff for long-dormant inflation. Right now the market seems to believe acceleration is the most likely outcome, with inflation an outside risk. But this is an unprecedented situation, and sentiment around which way things could go might swing violently as new data comes in.

To put it differently, four months ago everyone thought growth would be weak in the first quarter. Is the consensus more reliable now that everyone thinks growth will strengthen and inflation will remain contained?

As I asked yesterday, one wonders if Jay Powell can predict the price of oil? If WTI goes to $80 like many are suggesting, Jay Powell's "transitory" inflation may be more than "transitory."

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Dow Transports

I think I heard today that "Dow Transports" hit an all time high. Whether it did or not, the DJTA chart is pretty amazing.

Years ago I subscribed to a financial newsletter called "Dow Theory." It's long-running thesis was this: if the Dow Transports confirmed the Dow Industrials (going up) it was going to be a bull market, or the bull market would continue. So, I learned to watch "Dow Transports," although to this day I have no idea if that theory holds water. 

Tonight, looking at US equity futures (over at CNN and CNBC) I noted the "pre-market movers" (up and down) over at CNN. 

And look at this: one of my favorite companies to follow, UNP is at the top of the list of movers. Whoo-hoo.

The 52-week high for UNP is $228, so if "that" holds, it will be quite a day tomorrow. It's been my experience that futures at 7:30 p.m. never reflect what's going to happen the next day, unless it's bad news. LOL.

I have found no story explaining why UNP might be surging (of course, the railroads are of more interest right now simply due to the KSC story) but there was this press release nine hours ago:

Union Pacific today announced that it is building a state-of-the-art grain transload facility within its Global IV intermodal terminal in Joliet, Illinois that will reduce supply-chain costs for agricultural producers and processors. The Union Pacific Global IV Transload facility will be managed by JCT, which is a 50/50 joint venture between Consolidated Grain and Barge Co. and Gavilon Grain, LLC.

So, we'll see if UNP can actually do something that AAPL could not do: hold a gain. LOL.