August 3, 2018
It's Friday and that means it's time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don't worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let's take a look at this week's big headlines…
First, before we dive into the economic reports from the week, I think it's important to review the latest Federal Open Market Committee (FOMC) decision. FOMC members voted unanimously to leave key interest rates unchanged at 1.75% to 2%, as I expected.
Interestingly, the FOMC did note that the labor market is showing strength and that the U.S. economy overall is strong. Many economists viewed this stance as more bullish than the FOMC's "solid growth" comments from the June meeting. But it's not too surprising considering that U.S. GDP growth came in at 4.1% in the second quarter and that unemployment is at a low of 3.9%.
Almost all Fed watchers expect that the Fed will raise key interest rates at its September FOMC meeting. So moving forward, especially after September, market rates and the Treasury yield curve will largely determine Fed policy. Remember, the FOMC does not like to fight market rates.
On Tuesday, the Conference Board revealed that U.S. consumers continue to have a positive outlook on the U.S. economy. The consumer confidence index increased to 127.4 in July, compared with the revised reading of 127.1 in June. That's nearly an 18-year high! With GDP growth rising 4.1% in the second quarter, moderate interest rates and a strong labor market, it's no wonder that the U.S. consumer is more optimistic these days.
June was another good month for the manufacturing sector. Thanks to increased demand for appliances, components, computers, electronics, electrical equipment and transportation equipment, factory goods orders rose 0.7% in June. That's up from the 0.4% increase recorded in May. Factory goods orders are now up 8% year-over-year.
The big economic news this week was the payroll report this morning. The Labor Department announced that only 157,000 jobs were created in July. That's well below economists' consensus estimate for 190,000 jobs. The good news, though, is that June's payrolls were revised higher to 248,000, up from the 213,000 previously estimated. And the unemployment rate dipped to 3.9%, down from 4% in June.
Despite President Trump's efforts to shrink the trade deficit, the U.S. trade deficit increased in June and is climbing back towards a 10-year high. The Commerce Department reported that the trade deficit increased 7% in June to $46.3 billion. That's up from a revised $43.2 billion in May. The reason for the rise was because U.S. exports slipped 0.6% to $213.8 billion in June. Imports, on the other hand, increased 0.6% to $260.2 billion, with oil imports at their highest level in more than three years.
That's all I have for you this week. I'll be in touch again next week with the latest ratings out of Portfolio Grader.
Until next week,