Archive for June, 2019

US Q1 GDP Growth Confirmed at 3.1%

US Q1 GDP Growth Confirmed at 3.1%

The US economy grew by an annualized 3.1 percent in the first quarter of 2019, unrevised from the second estimate issued last month and following a 2.2 percent expansion in the previous three-month period. Upward revisions to nonresidential fixed investment, exports, state and local government spending, and residential fixed investment were offset by downward revisions to personal consumption expenditures (PCE) and inventory investment and an upward revision to imports. GDP Growth Rate in the United States averaged 3.22 percent from 1947 until 2019, reaching an all time high of 16.70 percent in the first quarter of 1950 and a record low of -10 percent in the first quarter of 1958.

The US economy grew by an annualized 3.1 percent in the first quarter of 2019, unrevised from the second estimate and following a 2.2 percent expansion in the previous three-month period. Nonresidential and residential fixed investment, exports and imports, and state and local government spending were revised higher while personal consumption expenditures and inventory investment came in lower than initially reported.

Positive contributions came from exports (0.65 percentage points), personal consumption expenditures (0.62 percentage points), nonresidential fixed investment (0.61 percentage points), private inventory investment (0.55 percentage points), and state and local government spending (0.48 percentage points). Imports, which are a subtraction in the calculation of GDP, decreased, posting a positive contribution of 0.30 percentage points. These contributions were partly offset by a decreasein residential fixed investment (-0.08 percentage points).

State and local government spending surged 4.6 percent during the first quarter, reversing a 1.3 percent contraction in the previous three-month period. In addition, private inventory investment accelerated and exports jumped 5.4 percent (vs 1.8 percent in Q4), boosted by sales of goods (6.0 percent vs 1.2 percent) and services (4.4 percent vs 2.7 percent); while imports dropped 1.9 percent (vs 2.0 percent in Q4) due to lower purchases of goods (-3.3 percent vs 0.5 percent).

These movements were partly offset by a deceleration in PCE (0.9 percent vs 2.5 percent).

The price index for gross domestic purchases increased 0.8 percent in the first quarter, compared with an increase of 1.7 percent in the fourth quarter. The PCE price index increased 0.5 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.2 percent, compared with an increase of 1.8 percent.

 

https://tradingeconomics.com/united-states/gdp-growth

The Federal Reserve held the target range for the federal funds rate at 2.25-2.5 percent

The Federal Reserve held the target range for the federal funds rate at 2.25-2.5 percent

The Federal Reserve held the target range for the federal funds rate at 2.25-2.5 percent but dropped a promise to be “patient” in adjusting rates and signaled possible rate cuts of as much as half a percentage point later this year. The policymakers left economic projections for growth and unemployment mostly unchanged but the headline inflation was forecasted at just 1.5% for the year, down from the 1.8% projected in March. Interest Rate in the United States averaged 5.67 percent from 1971 until 2019, reaching an all time high of 20 percent in March of 1980 and a record low of 0.25 percent in December of 2008.

The Fed is “insulated from short-term political pressures”, Chair Jerome H. Powell said in a speech at the Council on Foreign Relations in New York, as policymakers face heavy criticism by President Donald Trump for having raised interest rates last year.

Let me share some of the thinking behind this review, which is the first of its nature we have undertaken. The Fed is insulated from short-term political pressures—what is often referred to as our “independence.” Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests. Central banks in major democracies around the world have similar independence.

Let me turn now from the longer-term issues that are the focus of the review to the nearer-term outlook for the economy and for monetary policy. So far this year, the economy has performed reasonably well. Solid fundamentals are supporting continued growth and strong job creation, keeping the unemployment rate near historic lows. Although inflation has been running somewhat below our symmetric 2 percent objective, we have expected it to pick up, supported by solid growth and a strong job market. Along with this favorable picture, we have been mindful of some ongoing crosscurrents, including trade developments and concerns about global growth. When the FOMC met at the start of May, tentative evidence suggested these crosscurrents were moderating, and we saw no strong case for adjusting our policy rate.

Since then, the picture has changed. The crosscurrents have reemerged, with apparent progress on trade turning to greater uncertainty and with incoming data raising renewed concerns about the strength of the global economy. Our contacts in business and agriculture report heightened concerns over trade developments. These concerns may have contributed to the drop in business confidence in some recent surveys and may be starting to show through to incoming data. For example, the limited available evidence we have suggests that investment by businesses has slowed from the pace earlier in the year.

Against the backdrop of heightened uncertainties, the baseline outlook of my FOMC colleagues, like that of many other forecasters, remains favorable, with unemployment remaining near historic lows. Inflation is expected to return to 2 percent over time, but at a somewhat slower pace than we foresaw earlier in the year. However, the risks to this favorable baseline outlook appear to have grown.

Last week, my FOMC colleagues and I held our regular meeting to assess the stance of monetary policy. We did not change the setting for our main policy tool, the target range for the federal funds rate, but we did make significant changes in our policy statement. Since the beginning of the year, we had been taking a patient stance toward assessing the need for any policy change. We now state that the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.

The question my colleagues and I are grappling with is whether these uncertainties will continue to weigh on the outlook and thus call for additional policy accommodation. Many FOMC participants judge that the case for somewhat more accommodative policy has strengthened. But we are also mindful that monetary policy should not overreact to any individual data point or short-term swing in sentiment. Doing so would risk adding even more uncertainty to the outlook. We will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.

https://tradingeconomics.com/united-states/interest-rate

 

United States Manufacturing & United States Retail Sales

United States Manufacturing Production

Manufacturing production in the United States rose 0.7 percent year-on-year in April 2019, rebounding from an upwardly revised 0.3 percent fall in the previous month. Manufacturing Production in the United States averaged 3.79 percent from 1920 until 2019, reaching an all-time high of 67.90 percent in July of 1933 and a record low of -39.40 percent in February of 1946.

https://tradingeconomics.com/united-states/manufacturing-production

 

 

United States Retail Sales YoY

Retail Sales in the United States increased 3.20 percent in May of 2019 over the same month in the previous year. Retail Sales YoY in the United States averaged 4.37 percent from 1993 until 2019, reaching an all-time high of 11.20 percent in March of 1994 and a record low of -11.50 percent in March of 2009.

 

 

Calendar GMT Actual Previous Consensus TEForecast
2019-04-01 12:30 PM Retail Sales YoY 2.2% 2.8% 2.1%
2019-04-18 12:30 PM Retail Sales YoY 3.6% 2.2% 2.7%
2019-05-15 12:30 PM Retail Sales YoY 3.1% 3.8% 3.8%
2019-06-14 12:30 PM Retail Sales YoY 3.2% 3.7% 3.4%
2019-07-16 12:30 PM Retail Sales YoY 3.2% 3%
2019-08-15 12:30 PM Retail Sales YoY
2019-09-13 12:30 PM Retail Sales YoY

https://tradingeconomics.com/united-states/retail-sales-annual

 

Manufacturing Activity May 2019

US Non-Manufacturing Activity Grows Faster in May

 

The ISM Non-Manufacturing PMI for the United States rose to a three-month high of 56.9 in May 2019 from 55.5 in the previous month and above market expectations of 55.5. Business activity, new orders and employment all grew at a faster pace. Non Manufacturing PMI in the United States is reported by Institute for Supply Management.

The ISM Non-Manufacturing PMI for the United States rose to a three-month high of 56.9 in May 2019 from 55.5 in the previous month and above market expectations of 55.5.

Increases were seen in business activity (61.2 vs 59.5 in April), new orders (58.6 vs 58.1), and employment (58.1 vs 53.7), while new export orders growth slowed (55.5 vs 57.0) and imports were flat (50.0 vs 55.0). In addition, supplier deliveries dropped from the previous month (49.5 vs 50.5) and prices rose at softer pace (55.4 vs 55.7).

“According to the NMI, 16 non-manufacturing industries reported growth. The non-manufacturing sector continues to experience a slight uptick in business activity, but it is still leveling off overall. Respondents are mostly optimistic about overall business conditions, but concerns remain about tariffs and employment resources.

The 16 non-manufacturing industries reporting growth in May — listed in order — are: Accommodation & Food Services; Educational Services; Management of Companies & Support Services; Construction; Transportation & Warehousing; Real Estate, Rental & Leasing; Utilities; Wholesale Trade; Public Administration; Professional, Scientific & Technical Services; Mining; Health Care & Social Assistance; Other Services; Finance & Insurance; Information; and Retail Trade. The only industry reporting a decrease is Agriculture, Forestry, Fishing & Hunting.”

 

The ISM Manufacturing PMI in the US fell to 52.1 in May 2019 from 52.8 in the previous month, missing market expectations of 53. The latest reading pointed to weakest pace of expansion in the manufacturing sector since October 2016 as production growth eased to the weakest since August 2016 and backlog of orders contracted for the first time since January 2017. Business Confidence in the United States is reported by Institute for Supply Management.

The ISM Manufacturing PMI in the US fell to 52.1 in May 2019 from 52.8 in the previous month, missing market expectations of 53. The latest reading pointed to weakest pace of expansion in the manufacturing sector since October 2016.

 

The production index dropped 1 point to 51.3 in May, the lowest level since August 2016. In addition, other PMI components declined: the supplier deliveries index was down 2.6 points to 52; and the inventories index fell 2 points to 50.9. Meanwhile, increases were seen in new orders (up 1 point to 52.7), employment (up 1.3 points to 53.7), and prices (up 3.2 points to 53.2).

“Comments from the panel reflect continued expanding business strength, but at soft levels consistent with the early-2016 expansion. Demand expansion continued, with the New Orders Index strengthening, but remaining in the low 50s, the Customers’ Inventories Index remaining at a ‘too low’ level, and the Backlog of Orders Index contracting for the first time since January 2017. Consumption (production and employment) continued to expand, resulting in a combined PMI contribution of 0.3 percentage point. Inputs — expressed as supplier deliveries, inventories and imports — were lower this month, primarily due to inventory softening and supplier’s continuing to deliver faster, resulting in a combined 4.6-percentage point reduction in the Supplier Deliveries and Inventories indexes. Imports contracted for the second straight month. Overall, inputs reflect supply chains’ ability to respond faster and indicate that supply managers are closely watching inventories. Prices remain at a relatively stable level.

“Respondents expressed concern with the escalation in the U.S.-China trade standoff, but overall sentiment remained predominantly positive. The PMI continues to reflect slowing expansion,” says Fiore.

Of the 18 manufacturing industries, 11 reported growth in May, in the following order: Printing & Related Support Activities; Furniture & Related Products; Plastics & Rubber Products; Textile Mills; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; and Machinery. The six industries reporting contraction in May — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Petroleum & Coal Products; Wood Products; Paper Products; and Fabricated Metal Products.

https://tradingeconomics.com/united-states/business-confidence

https://tradingeconomics.com/united-states/non-manufacturing-pmi