Monthly economic update
November 2019

DOMESTIC ECONOMIC HEALTH 
 

On October 30, the Federal Reserve made its third interest rate cut in three meetings. The Federal Open Market Committee voted 8-2 to cut the federal funds rate by another 0.25%, taking its range to 1.50-1.75%. Earlier in October, the Fed announced that it would soon start buying about $60 billion in Treasuries per month and continue doing so for at least the first half of 2020. The central bank’s latest monetary policy statement noted that exports and business investment “remain weak.”2  

Certainly, the ongoing Sino-American tariff dispute has affected both exports and business investment. Last month, it looked like there was some progress toward a resolution: following an October 11 meeting at the Oval Office between top-level U.S. and Chinese negotiators, President Trump announced that both sides were close to approving “phase one” of a new U.S.-China trade pact. President Trump and Chinese President Xi Jinping planned to sign off on this initial installment of a trade deal during a November 16-17 economic conference in Chile, but that summit was canceled by the Chilean government in view of that country’s current social unrest. The White House believes an accord can still be signed “within the same time frame.”3,4

The jobless rate fell 0.2% in September, according to the Department of Labor’s latest employment report. It hit a 50-year low of 3.5%. The U-6 rate, which counts both the unemployed and underemployed, declined 0.3% to 6.9% (the all-time low is 6.8%). Even so, the economy generated 136,000 net new jobs in September; economists polled by Dow Jones forecast 145,000 new hires.5

Consumer spending rose 0.2% in September, by the estimation of the Department of Commerce. Speaking of shopping and buying, retail sales were down 0.3% in that month. The Conference Board’s Consumer Confidence Index came in at 125.9, a slight decline from its September level. The other closely watched gauge of household outlooks, the University of Michigan’s Consumer Sentiment Index, rose to 95.5.6

On the factory front, the data could have been better. U.S. industrial production fell 0.4% in September, while manufacturing output slipped 0.5%; meanwhile, hard goods orders weakened 1.1%. The Institute for Supply Management’s manufacturing Purchasing Managers Index (PMI) spent another month below 50, falling 1.3 points to 47.8; a number below 50 means activity in the sector is slowing. (ISM’s PMI for the much larger U.S. service sector was in better shape at 52.6, though it dropped 3.8 points in September.)6,7

In other news, the Bureau of Economic Analysis estimated third-quarter gross domestic product at 1.9%, and the Department of Labor said that the Consumer Price Index was flat for September, leaving its yearly advance at just 1.7%.6,8

CITATIONS:

2 - tinyurl.com/y6rlmswd [10/30/19]

3 - bloomberg.com/news/articles/2019-10-30/trump-xi-trade-meeting-in-doubt-after-chile-cancels-apec-summit [10/30/19]

4 - bloomberg.com/news/articles/2019-10-31/china-said-to-doubt-long-term-trade-deal-possible-with-trump [10/31/19]

5 - cnbc.com/2019/10/04/jobs-report---september-2019.html [10/4/19]

6 - investing.com/economic-calendar [10/31/19]

7 - instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm?SSO=1 [10/3/19]

8 - reuters.com/article/us-usa-economy-inflation/u-s-consumer-inflation-muted-labor-market-tightening-idUSKBN1WP1TW [10/10/19]

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