Two of my favorite economy bulls are Brian Wesbury and Bob Stein over at First Trust Advisors. Here is their latest take on things:
The consensus among economists, including at the Federal Reserve, is that fourth quarter growth will be just 0.5%. Some are even arguing that the economy will contract, the first negative quarter since 2001. Nonetheless, we still believe the economy is in good shape and expect real GDP to grow between 1.5% and 2.0% at an annual rate in Q4. Yes, this is below trend, but it is partially a payback for above-trend growth in Q2 and Q3. The three quarter average will still be near 3.5%. More importantly, key monthly data releases are nowhere near recession levels. The ISM Manufacturing Index was at 50.8 in November. At the start of the last recession (March 2001) the index was 42.6. The service sector is also still robust, with the ISM Non-Manufacturing Index at 55.8 in October versus 50.0 in March 2001. Other key surveys for November say the same thing. The Chicago Purchasing Managers Index, a measure of midwest manufacturing activity, was 52.9 in November versus 37.2 in March 2001. The Philly Fed Index, a measure of manufacturing in the Philadelphia region, was at +8.2 in November versus -20.2 in March 2001.
They weren't the only guys to notice that bullish ISM survey. Here's the take from JPMorgan Chase:
There were three key messages in the ISM report. First, the composite index is holding at levels far above recessionary territory—indeed, measurably above what might be expected under JPMorgan's GDP forecast (0.5% 4Q, 1.5% 1Q). Second, new export orders have soared while import orders have plunged to recession-like levels: trade should continue to contribute strongly to GDP. Indeed, by disproportionately helping industrial activity, this might explain the dichotomy between ISM and expected GDP growth. Third, the inventory correction looks advanced, with sentiment on inventories returning to more normal levels after being highly unfavorable in October.