U.S. economy defined by upbeat consumers, anxious business
The U.S. economy has been trotting along at 2% growth. It’s unlikely to speed up — or slow down — much in 2020.
The U.S. economy’s performance in the fourth quarter of last year is sure to show the same rift between upbeat consumers and wary businesses that has buffeted its performance in the past year — a divide that’s likely to persist into 2020.
Gross domestic product — the official scoresheet for the economy — likely grew about 1.9% in the fourth quarter, according to analysts polled by MarketWatch. Some forecast even slower growth. Here’s what to watch in the GDP report released early Thursday morning.
Consumer spending
Americans have spent rather generously over the past year and why not. Wages are rising at a steady 3% annual pace, unemployment has fallen to 3.5% or the lowest level in 50 years, and there’s no sign of recession in sight.
It would have been hard to expect consumers to keep spending at quite the same pace in the fourth quarter. After all, spending surged by 3.2% and 4.6% at an annual rate in the prior two quarters, one of the best back-to-back performances since the current economic expansion began in 2009.
Wall Street expects consumer spending to slow to a 1.9% annual pace in the final three months of 2019. Not bad, but not good enough to give a huge boost to GDP. Consumer spending is the single biggest contributor to GDP, accounting for as much as 70% of U.S. economic activity.
What could keep U.S. growth from dipping below 2% was a falling international trade deficit. Smaller trade deficits are a plus for GDP.
Although the trade gap jumped more than 8% in December, lower deficits in the first two months of the quarter mean that trade will add to U.S. growth figures.
The bad news? The smaller trade gap stemmed mostly from higher U.S. tariffs on China that temporarily depressed imports. That trend is already reversing itself since President Trump agreed a trade deal with China in December.
Wall Street expects international trade to become a drag on the economy early this year.
Companies cut investment in the spring and summer as U.S. trade tensions with China ratcheted up, offsetting some of the strength of consumer spending.
While business investment was weak again in the fourth quarter, it might not be a big blot on the economy.
Business spending on equipment and structures likely slipped again, but lower interest rates have given the housing industry a shot in the arm. So it could be a wash: most economists predict flat business investment in the fourth quarter.
The wild card, as it often is, is the level of inventories. That is, goods produced or imported during the quarter but not sold yet. Inventories are only expected to grow one-third as much as they did in the third quarter.
As a result, lower inventory growth is forecast to knock almost one full percentage point off GDP. That’s a big headwind.
To be sure, inventory growth is one of the hardest numbers to pin down. It can rise or fall more than expected depending on how much consumers spend, businesses produce and wholesalers import. But it’s almost certainly going to be a negative in the fourth quarter.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
