• AIM Team

NAM: Monday Economic Report

The U.S. economy grew 2.1% at the annual rate in the fourth quarter. Global headwinds and trade uncertainties continued to have large impacts on the underlying data, with businesses hesitant to invest in their firms and sizable declines in exports and imports, especially the latter.In 2019, real GDP rose by 2.3%, easing from 2.9% growth in 2018. The current forecast is for 1.3% growth in the first quarter of 2020, with the U.S. economy expanding by 1.8% for the year. With stabilizing global growth, particularly in manufacturing, and more certainty on trade, business investment will hopefully improve over the coming months.On the manufacturing front, manufacturing activity rebounded in the Dallas and Richmond Federal Reserve Bank districts, with cautious optimism for the next six months.New durable goods orders rose 2.4% in December, bouncing back after falling 3.1% in November. With that said, the latest figures are boosted by very strong defense aircraft and parts orders. Excluding transportation equipment, new orders edged down by 0.1%.New durable goods orders have fallen 3.7% over the past 12 months, with a decline of 1.0% with transportation equipment excluded. As such, durable goods manufacturers ended the year on another disappointing note. Core capital goods spending—a proxy for capital spending in the U.S. economy—decreased 0.9% in December, but on a year-over-year basis, this figure increased 0.9%.Private manufacturing wages and salaries rose 0.7% in the fourth quarter, up from 0.6% in the third quarter. That translated into 3.2% growth over the past 12 months, the fastest year-over-year pace of growth since the first quarter of 2002, or in nearly 18 years.Personal consumption expenditures rose 0.3% in December, jumping 5.0% over the past 12 months. With that said, personal spending was very disappointing one year ago, down 0.8% for the month of December 2018, and as such, the year-over-year comparisons speak as much to last year’s weaknesses as to this year’s modest gains.Americans were more confident in January, with higher sentiment readings from both the Conference Board and the University of Michigan. Overall, consumers responded favorably to strong labor market and upbeat views of income growth.As expected, the Federal Open Market Committee left interest rates unchanged after its Jan. 28–29 meeting, keeping the target federal funds rate between 1.50% to 1.75%. The Federal Reserve reduced short-term interest rates three times last year, and participants feel that those moves were sufficient to stimulate activity and reduce downturn risks.This morning, analysts will be looking for signs of stabilization in the ISM® Manufacturing Purchasing Managers’ Index®, which has contracted for five consecutive months.Later this week, the first reading on employment for 2020 will be released. Manufacturing employment fell by 12,000 workers in December, but for 2019, the sector added roughly 3,800 workers per month on average. Hiring softened in light of weaknesses in the global economy and from anxieties about trade policy.