U.S. Equities Rose Yet Again As Additional Economic Data Rebukes The Idea of A Downturn
Last week’s economic data overall lent support to the idea that the economy continues to defy reports of its demise. It turns out that growth in the third quarter was stronger than first reported, 2.1 percent versus 1.9, in part due to stronger consumer spending. Durable goods orders rebounded after a weak September. And the personal consumption expenditure (PCE) deflator showed little price pressure. And optimism for agreement on a phase one trade deal between the U.S. and China stayed high, as the two sides continued to talk.
Pricing the Economic Impact of the Trade War; Better Economic Data Out of China
There was less upbeat news on the impact of the trade war. The New York Federal Reserve published a report titled “Who Pays the Tax on Imports from China?” No surprise, except perhaps to some in Washington, the report concluded that it is the U.S. importers and consumers that are paying the tariffs, estimated to total $40 billion dollars a year. In a separate report, according to the CPB World Trade Monitor, global trade volumes declined 1.3 percent in September.1 This disappointing result followed two months of increases that had led some to speculate that the slowdown in trade had stabilized.
China delivered some better economic news of its own last week when it reported that its manufacturing sector actually expanded in November after six months in contraction. An increase in the service sector resulted in the strongest composite reading since March.
What’s to Come This Week in The U.S. Economic Calendar
The economic calendar in the U.S. is jammed in the week ahead. At the top of the list is the November jobs report. The Bloomberg consensus calls for the creation of 188,000 new non-farm jobs, although this month’s total may be distorted by the end of the GM strike. The unemployment rate is expected to remain unchanged at 3.6 percent. Both the ISM and Markit manufacturing reports are scheduled. The ISM version has been in contraction for the past three months and is expected to stay that way. The Markit version has remained consistently in expansion and is expected to stay there. And the companion service sector reports by both services are scheduled as well. Lastly, the preliminary consumer sentiment survey for December is scheduled for Friday.
1 CPB World Trade Monitor, https://www.cpb.nl/en/worldtrademonitor
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The Standard & Poor’s 500 Index (S&P 500® Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices but excludes brokerage commissions or other fees. It is not possible to invest directly in an index.
The personal consumption expenditure (PCE) measure is the component statistic for consumption in gross domestic product (GDP) collected by the United States Bureau of Economic Analysis (BEA).
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