THE MONTH IN BRIEF
Wall Street maintained its optimism in September. While trade worries were top of mind for economists and investors overseas, bulls largely shrugged at the prospect of tariffs and the probability of another interest rate hike. The S&P 500 rose 0.43% for the month. On the whole, U.S. economic indicators were quite good, and some offered pleasant surprises.1
DOMESTIC ECONOMIC HEALTH
As many analysts expected, the Federal Reserve raised the main interest rate by 0.25% on September 26 to a target range of 2.00-2.25%. The word “accommodative” was absent from its latest policy statement, distinctly hinting at a shift in U.S. monetary policy. As September ended, the CME Group’s FedWatch Tool had the odds of a quarter-point December rate hike at 76.5%.2,3
On the last day of September, Canada joined the U.S. and Mexico in a newly proposed trade pact representing an evolution of the existing North American Free Trade Agreement (NAFTA). The new accord, if approved by the governments of Canada, Mexico, and the U.S., would toughen intellectual property and trade secret regulations, require 75% of autos made in North America to use parts from North American manufacturers, stipulate new labor requirements for Mexican industry, and seek to crack down further on unsanctioned fish, animal, and timber imports.4
New data showed hiring bouncing back in August. The Department of Labor stated that the economy added 201,000 net new jobs in that month. Annualized wage growth reached 2.9%, the best number seen since the end of the Great Recession in 2009. The main jobless rate remained low at 3.9%; the underemployment (U-6) rate ticked down to 7.4%, a 17-year low.5
While wages grew 2.8% in the year ending in August, the Consumer Price Index rose only 2.7% in those 12 months. July’s CPI showed yearly inflation at 2.9%. Yearly core consumer inflation also declined 0.2% to 2.2% in the August CPI.5,6
Consumers saved some of what they earned in August. Personal income and personal spending were both up 0.3% for the month; retail sales, though, only advanced 0.1%; 0.2%, with automotive and gas purchases factored out.6
Households viewed the present and near future of the economy with considerable optimism. The Conference Board’s consumer confidence index came in at a remarkable 138.4 last month, up another 3.7 points. The University of Michigan’s barometer rose 4.6 points to 100.8 in its initial September edition, then leveled off to a final September mark of 100.1.6
Off Main Street, durable goods orders advanced 4.5% in August, more than reversing a 1.2% July decline. Industrial production rose 0.4%; factory output, 0.2%. Producer prices retreated 0.1% in August, sharply reducing their annualized gain from 3.3% to 2.8%. The Institute for Supply Management’s purchasing manager indices, gauges of business activity in the manufacturing and non-manufacturing sectors of the economy, looked good in August. The factory PMI climbed to a stellar 61.3 from its 58.1 July level, and the service sector PMI rose to 58.5 from the prior reading of 55.7.6,7
