Market Overview

Look To Semiconductors If You Really Want To Understand U.S. GDP

Share:
Look To Semiconductors If You Really Want To Understand U.S. GDP

Investors concerned that the U.S. economy may fall into recession in the near future may be missing a very simple and highly-correlated leading indicator of U.S. GDP growth: semiconductor billings.

According to Andrew Zatlin of Moneyball Economics, the U.S. semiconductor business has been an excellent bellwether for the U.S. economy ever since the bursting of the Dot Com Bubble.

“Semiconductors are the lifeblood of the modern economy,” Zatlin writes. “If a semiconductor isn’t in it, it is in the machine that made it.”

Related Link: Fallout From The Disastrous Doha Oil Producers Meeting: Is The Rally Over?

He points out that the shale oil boom is the only time that U.S. semiconductor billings and U.S. GDP growth significantly diverged since 2001.

According to Zatlin, there are several advantages to using the semiconductor business as a signal for GDP. Semiconductor demand is a leading indicator, it provides strong visibility to end-user demand and the business has a fixed production cycle.

What is this correlation saying about U.S. GDP growth in the most recent quarter? According to Zatlin, silicon wafer shipments suggest that GDP will likely come in between 1.9 and 2.3 percent higher year-over-year.

So far this year, the SPDR S&P 500 ETF Trust (NYSE: SPY) is up 2.1 percent and the Market Vectors Semiconductor ETF (NYSE: SMH) is up 3.0 percent.

Disclosure: the author holds no position in the stocks mentioned.

Posted-In: Andrew Zatlin Moneyball EconomicsAnalyst Color Specialty ETFs Economics Analyst Ratings ETFs Best of Benzinga

 

Related Articles (SMH + SPY)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
PEPMorgan StanleyReiterates137.0
AZRXH.C. WainwrightMaintains7.0
PEPMacquarieMaintains138.0
POLBuckinghamMaintains36.0
BKBuckinghamMaintains53.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Community Trust Bancorp Q1 EPS Beat Expectations

Marijuana Legalization Could Hurt ISIS And The Mafia, May End California Drought