Potential Phase I Trade Agreement — Will this Prove to Be Phase Last

Slowing Economy and Dangers from Food Inflation Move China In the past, we wrote that both the U.S. and China needed to come to some limited trade agreement for their own reasons. In the case of the U.S., the President needed the economy to continue growing to help his reelection. For China, incentives came from …

Can Consumers and the Fed Keep the Economy Growing?

Third-Quarter GDP Report Better Than Expected – Thank the Consumer Real gross-domestic-product (GDP) increased at an annualized rate of 1.9% for the third-quarter —modestly above expectations. This result compares to 2.0% growth in the second quarter (see Figure 1). Once again, personal consumption expenditure increases of 2.9% in the quarter drove GDP growth. While a …

Impeachment Hearings and Trade –the Outlook for a Trade Agreement and the Presidential Election

Will Impeachment Hearings Change China’s Approach to Negotiations? Our past commentaries looked for the President to come to some level of trade agreement with China well before the U.S. presidential elections. Those commentaries also assumed that the Chinese leadership faced their own incentives for a first-step settlement. Therefore, there seemed mutual incentives for a first …

Survey Data and Hard Data — the Week Offered Both—Different Economic Readings

Busy Report Week — First Surveys and Then Hard Data The first week of October started with sobering economic news in the form of surveys from the Institute for Supply Management (ISM). At weekend, unlike the surveys, a hard data employment report came in from the Bureau of Labor Statistics (BLS) showing solid employment gains …

German Weimar Hyperinflation Anxiety Delays Needed Fiscal Spending

The European Central Bank Tries More of the Same Monetary Tools Last Thursday (9/12/19), the European Central Bank (ECB) cut its deposit rate to minus 0.5 percent, instituted a tiered interest-rate system to exclude some bank deposits, and, key, resumed its quantitative easing (QE) to the tune of $22 billion of monthly bond purchases – …

Pigs Help Trade Negotiations Fly Again

Goodwill Trade Gestures The U.S. and China made recent goodwill gestures in efforts to improve the tone of trade negotiations. First, President Trump delayed the increase of tariffs from 25 to 30 percent on $250 billion of Chinese goods to October 15th. The change avoided placing tariff increases on China’s National Day. That day marks …

All Hail the Consumer- Potentially More Ammo for Consumer Spending

Latest Reading of 2nd Quarter GDP Shows Stronger “Details” The latest government estimate for 2nd quarter gross-domestic-product (GDP) growth of 2.0% came in slightly lower than July’s preliminary estimate of 2.1% (lots of 2’s). More important, details of this report show underlying economic strength that will likely bolster the outlook for third-quarter GDP growth.   Consumers Strike …

Trade Whiplash – Market Whiplash

Whiplash 1—Additional Tariff Increases from China and the U.S. On Friday, August 23, China’s Ministry of Finance announced it would increase tariffs on $75 billion of U.S. exports to that country. With that announcement, the administration hit back by increasing tariffs, already in place from 25-30% on October 1. It would then further increase the …

Inverted Yield Curve – Economic Outlook Still Trade War Dependent

U.S. 10-Year/2-Year Brief Inversion This morning (August 14), the U.S. 10-Year/2-Year yield spread briefly inverted. Inversion means that the 2-Year Treasury Bill paid a higher interest rate than did the 10-Year Treasury Note. That inversion reversed itself quickly. Many see the inversion of Treasury bond yields as a good forecast of recessions — but not …