Week of August 26 - 30, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

September 4, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (Aug 24) 214k est., 215k actual, 211k prior
Continuing Claims (Aug 17) 1686k est., 1698k actual, 1676k prior
GDP Annualized QoQ (2Q S) 2.0% est., 2.0% actual, 2.1% prior
Personal Consumption (2Q S) 4.3% est., 4.7% actual, 4.3% prior
Core PCE QoQ (2Q S) 1.8% est., 1.7% actual, 1.8% prior
Core PCE Deflator YoY (Jul) 1.6% est., 1.6% actual, 1.6% prior
PCE Deflator YoY (Jul) 1.4% est., 1.4% actual, 1.3% prior: R+
Retail Inventories MoM (Jul) 0.3% est., 0.8% actual, -0.3% prior: R+
Pending Home Sales MoM (Jul) 0.0% est., -2.5% actual, 2.8% prior
Personal Income MoM (Jul) 0.3% est., 0.1% actual, 0.5% prior: R+
Real Personal Spending MoM (Jul) 0.3% est., 0.4% actual, 0.2% prior
University of Michigan Sentiment Survey (Aug F) 92.4 est., 89.8 actual, 92.1 prior
Markit US Manufacturing PMI (Aug F) 50.0 est., 50.3 actual, 49.9 prior
ISM Manufacturing PMI (Aug) 51.3 est., 49.1 actual, 51.2 prior

 Strong or Improving
 Inconclusive or lacking trend
 Weak or declining
R+ Revised up
R- Revised down

Directional change based on general
long-term tends.

Capital Market Implications

It was clear from last week’s economic releases that US inflation remained tame and any acceleration in the overall price level is unlikely in the near term. There was some improvement in the final release of the Markit manufacturing PMI for August but that was offset by unexpected weakness in the ISM manufacturing report for the month, which at 49.1 indicated contraction in the sector. Unfortunately, presently, there is little evidence that the downturn in manufacturing in the US has bottomed. The second estimate of second-quarter GDP was slightly lower than the initial estimate (2.0% versus 2.1%), but more importantly consumption for the quarter was revised upward to 4.7%. Additionally, as retail sales were strong in July, consumption maintained its momentum into the third quarter.

US investors were encouraged last week when China indicated it would not retaliate, at least not at this time, against the impending US trade tariffs. Although there was little evidence to support the claim, market participants - hoping there would be a thaw in the trade war- drove stocks higher last week to their best performance since June. Thus, for the week overall, the S&P 500 Index climbed 2.8% and the Dow Jones Industrial Average soared 3.1%. The rally was broad-based, as every sector of the S&P rose at least 1.6%. International markets were also positive, although less so. Developed foreign markets gained 0.9% last week and emerging markets increased 1.2%. The bond pits are traditionally quiet coming into the long Labor Day weekend and that was the case last week. High yield bonds gained the most, up 0.5%, while the Barclay’s aggregate bond index and US corporate bonds rose 0.2% and 0.1%, respectively. Ten-year municipal bonds closed out the week relatively unchanged.