NAM: Monday Economic Report
Worries about a global economic slowdown—which has been exacerbated by renewed trade uncertainties—has caused financial markets to fall dramatically. These trends were outlined in this month’s Global Manufacturing Economic Update, which was released last week.
Since that release, continuing signs of weakness arose in Europe. German industrial production fell 1.5 percent in June, declining for the second time in the past three months and down a whopping 5.1 percent year-over-year. At the same time, real GDP in the United Kingdom decreased 0.2 percent in the second quarter, the first decline in activity since the fourth quarter of 2012, largely on Brexit concerns, with 1.2 percent growth year-over-year.
Anxieties about the global outlook have rocked financial markets globally. In the United States, the Dow Jones Industrial Average has more than 4 percent since July 15. To be fair, that was better than what was seen midweek. In addition, yields on 10-year Treasury notes have dropped sharply to the lowest rates since October 2016, falling 150 basis points since November 2018.
Producer prices for final demand goods and services rose 0.2 percent in July, increasing 1.7 percent over the past 12 months, but down dramatically from 3.4 percent in July 2018. In addition, core producer prices have grown 1.7 percent, down from 2.1 percent in June and at their lowest level since January 2017. These data continue to reflect a deceleration of inflationary pressures over the course of the past year.
The easing in producer price growth has provided some comfort to the Federal Reserve, particularly as it explores additional rate cuts in the coming months, perhaps as soon as the next meeting on September 17–18. Indeed, it is looking increasingly likely that the Federal Open Market Committee will cut short-term rates again next month, extending the 25 basis point cut made at its July 30–31 meeting.
On a more encouraging front, job openings in the manufacturing sector were unchanged at 503,000 in June, continuing to be an all-time high. Over the past 12 months, job openings have averaged nearly 483,000 per month—a highly elevated pace. With that said, the pace of hiring and separations slowed in June, mirroring other economic activity and employment data.
Meanwhile, nonfarm job openings changed little for the month, down from 7,384,000 in May to 7,348,000 in June. More importantly, for the 16th straight month, the U.S. economy reported more job openings in the U.S. economy than the number of people looking for work (5,975,000 in June). That statistic suggests there were roughly 1.4 million more job postings than there were unemployed people to fill them.