U.S. Growth Enters Fourth Quarter on More Solid Footing Economic growth was stronger during the third quarter than earlier estimated due in part to upward revisions to inventory investment
(…) Gross domestic product—the value of all goods and services produced across the economy—rose at a 2.1% annual rate in the third quarter, adjusted for seasonality and inflation, the department said. That was up from the previous estimate of a 1.9% pace of growth, mainly due to stronger inventory investment. (…)
Forecasting firm Macroeconomic Advisers on Wednesday projected GDP would expand at a 1.8% rate in the fourth quarter. (…)
Personal-consumption expenditures rose at an unrevised 2.9% annual rate in the third quarter, compared with 4.6% in the second quarter. (…)
Business investment, though, remains a weak spot for the economy. Nonresidential fixed investment—which reflects business spending on software, research and development, equipment and structures—fell at a 2.7% annual rate in the third quarter following a 1% pace of decline in the prior quarter.
U.S. corporate profits also fell in the third quarter, according to the government’s first broad estimate, due in part to legal settlements with Facebook Inc. and Google parent Alphabet Inc.
A key measure of business earnings—profit after tax without inventory valuation and capital-consumption adjustments—fell 0.6% from the prior quarter after rising 3.3% in the second quarter. Compared with the third quarter a year earlier, after-tax profits were down 0.4%. (…)
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U.S. Consumer Spending Rose 0.3% in October Households pare back their goods purchases, a sign of caution among consumers
(…) But spending for long-lasting goods, particularly new motor vehicles, fell at a seasonally adjusted 0.7% rate. (…)
Household incomes were flat overall in October, the report said, but wages and salaries grew at a seasonally adjusted annual rate of 0.4% on the month, up from 0.1% in September. Some of that increase reflects adjustments made by the Commerce Department to account for strike pay and contract ratifications payments related to this fall’s General Motors Co. strike. (…)
The price index for personal-consumption expenditures, the Federal Reserve’s preferred gauge for inflation, rose 1.3% year-over-year in October, the same rate as in September. The Fed targets inflation at 2%.
On a monthly basis, the index rose 0.2%.
The closely watched core PCE index, which excludes volatile food and energy prices, moved up 1.6 % on a year-over-year basis in October.
So many ways to skin a cat, especially with monthly, revisable data. The positive spin on the most recent consumer-related data comes form the continued good trend in Wages and Salaries, up 0.4% MoM in October and +4.4% annualized in the last 3 months. The negative spin is de –0.1% MoM October drop in Disposable Income, dragging the last 3months growth to +3.2% a.r. and the last 2 months to a very weak +1.2%.
In real terms, Disposable Income is up at a still decent +2.4% a.r. in the last 3 months but is flat in the last 2 months.
Spending tends to be better synced with disposable income than with labor income.
We should thus be somewhat concerned by the trend in real expenditures, although the last 3 months showed a still decent +2.1% a.r. while real income grew +2.7% annualized.
YoY, real expenditures are up 2.3% while real DPI is up 2.8%. Absent a major slowdown in employment, the consumer looks o.k.
Based on initial claims to Nov. 23, employment also looks o.k.:
Global trade expected to moderately contract over next three months
The DHL Global Trade Barometer predicts protracted
slowdown in global trade, sliding -2 points to 45 since the
latest update in September. Out of all the surveyed
countries, only India is expected to grow moderately at 54
points (+5 points). Japan (-5 points) and UK (-4 points)
show the largest drop in outlook, while the respective
trade outlooks for China (-3 points), Germany (-3 points),
South Korea (-2 points) and USA (-1 point) are also slightly
decelerating. (…)
China Criticizes U.S. Support for Protests, Signals Trade Hope China is leaving the door open for a trade deal with the U.S., even as it complains about President Trump’s signing of a bill supporting Hong Kong’s anti-Beijing protesters.
(…) Asked whether the bill’s signing would affect trade talks, Chinese Foreign Ministry spokesman Geng Shuang didn’t answer directly. He instead demanded the U.S. not implement the law because it would risk “undermining our bilateral relations and cooperation in important areas.” (…)
The officials seized on a sentence in Mr. Trump’s signing statement that emphasized his “constitutional authorities with respect to foreign relations.” For Beijing, that is a clear signal the U.S. leader has given himself plenty of wiggle room to back off. (…)
Some outside experts agree with Beijing’s interpretation that while the U.S. law gives the president broad powers to impose sanctions and travel curbs on individuals who commit human-rights violations in Hong Kong, the president already had many of those powers—and still has the discretion to not apply them. (…)
India’s GDP Growth Slows to More Than 6-Year Low of 4.5% India’s economy slowed for the sixth quarter in a row during the past period, with gross-domestic-product growth dipping to a six-and-a-half-year low as concerned companies and consumers continued to hold back on spending.
Daimler plans to cut at least 10,000 jobs worldwide by end of 2022
Top U.S. retailers absorb tariff pressure ahead of holiday shopping season Prices for electronics sold online at top U.S. retailers were up slightly heading into the critical U.S. shopping season, but sites including Walmart Inc and Amazon.com Inc have held prices steady for many other popular holiday products despite the pressure from tariffs on Chinese imports.
(…) But while tariffs have driven up costs of goods for many retailers, at least the large firms have so far refrained from passing that cost pressure to shoppers, according to interviews with researchers, consultants and retail companies.
EBIT margins for all retailers excluding Walmart have been declining since October 2018 and at 6.7% are at their lowest since 2010, according to an analysis by Oxford Economics. (…)
On Sept. 1, the U.S. imposed a 15 percent tariff on many consumer goods from China that increased the cost of goods sold for most retailers. For example, Dollar Tree said tariffs will increase its cost of goods sold by about $19 million in the fourth quarter if tariffs are fully implemented.
In the Profitero analysis, Walmart’s products were only 0.4 percent more expensive compared to a year ago on a sample of over 6,000 popular holiday products. Amazon was 0.6 percent pricier on 9,200 products. A sampling of 1,200 items sold online by Target were 0.9 percent less expensive than during the year earlier period.
By contrast, chains such as Staples were over 4.7 percent more expensive, and the goods sold by Best Buy were priced at 1.1 percent more. (…)
Don’t Expect Another Rough December for Stocks Back-to-back negative returns in December are rare, analysts say
With just days to go before the final month of the year, the S&P 500 is heading for its best annual performance since 2013. History suggests stocks are likely to keep rising through the end of the year.
The year-end selloff that closed 2018 marked the U.S. stock market’s worst December since 1931. While some elements that contributed to last year’s slide—like a slowing global economy—remain in play, there is little reason to expect a repeat, analysts say.
Going back to 1950, there have only been four instances when the stock market logged back-to-back negative returns in December, according to Strategas Research Partners (…).
Roughly 75% of stocks in the S&P 500 are moving higher, as measured by the change in their 200-day moving average. That is compared with less than 50% this time last year. (…)
The Russell 2000 index of small-capitalization stocks has risen 4.3% this month, outpacing the S&P 500’s 3.5% gain. Cyclical shares such as banks and industrial companies have also outperformed the S&P 500 in November. (…)
FYI:
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S&P 500 vs. U.S. CEO Confidence Survey Economic Expectations
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MSCI World Value vs. Growth
