U.S.: Data Still Weak, Trade War Drags On

Dan North
Dan North Chief Economist North America

Manufacturing picked up in July but still remains in a downtrend. New orders for durable goods gained +2.1% m/m to a tepid +1.0% y/y rate. But critical core orders, a proxy for business investment, gained only +0.4% m/m and are down -0.5% y/y, the most in almost three years. Consumer confidence rose +0.7 point m/m, but the crucial spread between assessments of the present vs. future opened up from -58.5 points to -70.2 points, a level associated with recession. Housing prices in 20 major cities were flat in June falling to +2.2% y/y, the slowest in almost seven years, while volatile sales of new homes fell -12.8% m/m. Fed Chair Powell last Friday indicated that the Fed would be ready to act if uncertainty over a trade war continued to weigh on the economy. The same day the trade war did indeed worsen as China and the U.S. both imposed new tariffs and exchanged heated words. The Fed is quite likely to cut rates in September and perhaps even once more in 2019.