January 9, 2019
During the past several months, there’s been a lot of media coverage on the direction of the economy. Accordingly, Industry At A Glance addressed that topic last week with focus on current earning S&P500 earnings estimates for the coming year.
The key take-away being that, “What’s most important in this discussion is the general trend. It’s clear that most analysts believe companies will experience another good year in 2019. That’s a positive outlook for the economy – and should forebode another solid year for beef demand.”
On the heels of that column, the Bureau of Economic Analysis released its regularly-scheduled monthly employment report. The headline number was a blockbuster! The U.S. economy smashed analyst expectations by adding 312,000 jobs in December. Moreover, the October and November estimates were revised upward.
This week’s graph features monthly gains – along with the 12-month moving average. The 12-month moving average for job creation now stands at 220,000 – the best level in over two years.
It’s useful at this juncture to remind ourselves of the key drivers of demand for any product. Those include population, income, tastes/preferences, expectations, and price of other goods. All of this discussion around the economy focuses on income and expectations. That is, higher wages (included in the Jobs report) and higher expectations generally lead to more robust spending. That should equate to improved beef demand.
As noted last week, domestic demand has been surprisingly robust through the year, helping to underpin cattle prices – despite higher levels of meat production. And while mixed signals remain around the economy (like always) and lots of volatility in the markets, the labor market is seemingly in good shape.
What’s your assessment of the overall strength of the economy? How do you perceive beef spending to take shape in 2019? Leave your thoughts in the comments section below.
Nevil Speer serves as an industry consultant and is based in Bowling Green, KY. Contact him at [email protected].
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