The manufacturing confidence right now, compared to last year, is very good. This time each year the National Association of Manufacturers (NAM) preforms a survey. One key question they ask in this survey is how manufacturers think things are going in relation to entering next year. The reason they ask these questions at this time in the year is for strategic planning purposes. Last year, when this survey was done, roughly 60% of manufacturers looking forward into 2017 said they thought it would be good. This year, looking forward into 2018, 90% of manufacturers believe it will be good. This is the highest percent in the last 20 years.
Earning season kicks into high gear this week, especially on Thursday and Friday, where the five largest banks are expected to report around 21 billion dollars in profits. Financials are looking very good right now, in fact, the U.S. Banking System earned 48.3 billion dollars during the second quarter. This number is well above the pre-crisis high of 2006. Bank profitability should only get better with lower regulation and potential corporate tax cuts. These figures show that the economy is strong and money is moving.
So far this year, we have had strong earnings growth, quarter over quarter. In 2015 and 2016 we had five straight quarters of falling earnings, which was rough for both companies and the market. We were comparing against some weak quarters. Now, we are finally comparing against some strong quarters. While expectations are good, they have come down a little bit. In the second quarter we expected around 8% plus earnings growth, now it’s lower, around 5%. How much does that manufacturing confidence project forward into growth in the market? We will continue to monitor these things as we move closer to the end of the year.
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