{"id":1636,"date":"2020-01-07T15:34:43","date_gmt":"2020-01-07T20:34:43","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1636"},"modified":"2020-01-07T15:34:43","modified_gmt":"2020-01-07T20:34:43","slug":"december-nonmanufacturing-activity-and-november-trade-deficit","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1636","title":{"rendered":"December NonManufacturing Activity and November Trade Deficit"},"content":{"rendered":"\n

KEY DATA:<\/strong>  ISM (NonMan.): +1.1 points; Orders: -2.2\npoints; Backlogs: -1 point\/ Trade Deficit: -$3.9 billion; Exports: +0.7%;\nImports: -1%<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cGrowth might have been modestly better than\nexpected at the end of last year, but only because the tariffs created\ndislocations in trade flows.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  It\u2019s a new year but we are still trying to get\na handle on how the economy ended last year. \nIt looks like growth in the 2% is the new normal.  Actually, it is more like the old normal\ngiven that is what we averaged during most of the 2010s.<\/em><\/strong>  Looking at the service segment of the\neconomy, that is the level of growth we are still seeing.  The Institute for Supply Management\u2019s NonManufacturing\nrose in December.<\/em><\/strong>  The fourth\nquarter average points to a GDP growth rate of somewhere around (drum roll\nplease) 2%.  That said, the details were\nnot that great.  In particular, orders\ngrew more slowly and backlogs shrank for the third consecutive month.  Those results don\u2019t point to any improvement\nin the service portion of the economy in the early part of 2020.  <\/em><\/strong><\/p>\n\n\n\n

On the other hand, it looks like the fourth quarter\nmay have been helped along by distorted trade flows.<\/em><\/strong> Indeed, despite what\nappears to have been decent consumer spending, imports fell in November.  That shouldn\u2019t happen in this type of\neconomy. <\/em><\/strong> While we should not expect\ndemand for foreign products to be booming, they should be growing.  Purchases of consumer and capital goods were\ndown solidly.  Contrasting that was a moderate\nincrease in exports.<\/em><\/strong>  The rest of\nthe world is growing slowly and is still buying our products, an indication that\nour import situation is not due to fundamental economic factors.  With exports rising and imports falling, the\ntrade deficit narrowed to the smallest level in three years.<\/em><\/strong>  Much of that came from the roughly fifteen\npercent drop in imports from China.  The\ntrade deficit with China has also narrowed by the same percentage.   <\/em><\/strong>MARKETS AND FED\nPOLICY IMPLICATIONS:<\/strong>We\nwill not get the first reading of fourth quarter growth for three more weeks,\nbut it is likely to be about 2% to 2.25%.<\/em><\/strong>  At least that is what I have had for months\nnow and there is no reason to believe that will not be the case.  The wild cards are the usual ones.  We don\u2019t know what happened to trade in\nDecember since the decision to put off the additional tariffs on Chinese\nproducts was made too late to cause any major change in the import\npattern.  Also, Boeing\u2019s decision to\nsuspend production, which had led to planes being inventoried, also may have\ncome too late to change the inventory number, though that is unclear.  But consumer and business spending looks to have\nbeen moderate and if we focus on those fundamental components, it is clear that\ngrowth is okay but not great. So, where do we go from here?  More than likely, more of the same.<\/em><\/strong>  And given the way investors loved that level\nof growth last year, they will likely continue to eat up stocks this year.  The one big difference is that there isn\u2019t an\nextra trillion dollars to buy back stock, so the artificial hyping of stock\nprices may slow.  At least it\nshould.  As for the Fed, it is likely on\nhold for quite some time.  There may\nstill be some who think rates should be lowered, but not a lot of them are\nvoting members of the FOMC. \n\n\n\n<\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA:  ISM (NonMan.): +1.1 points; Orders: -2.2 points; Backlogs: -1 point\/ Trade Deficit: -$3.9 billion; Exports: +0.7%; Imports: -1% IN A NUTSHELL:  \u201cGrowth might have been modestly better than expected at the end of last year, but only because the tariffs created dislocations in trade flows.\u201d WHAT IT MEANS:  It\u2019s a new year but … Continue reading December NonManufacturing Activity and November Trade Deficit<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1636","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1636","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1636"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1636\/revisions"}],"predecessor-version":[{"id":1637,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1636\/revisions\/1637"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1636"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1636"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1636"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}