Wednesday, September 19, 2018
Ahead of Wall Street’s opening bell this morning, new economic data crosses the tape. These findings will be of particular importance to Fed members who reconvene next week to decide on new interest rate policy. The smart money all year has been on another interest rate hike in the month of September; to a range of 2.00-2.25%. Will today’s data do anything to skew expectations?
In a word, No. While we see notable improvements in Housing Starts and the U.S.’s Current Account Deficit, Building Permits lagged behind. In total, all these new data points continue to fall in the familiar realm of a strong economy just beginning to show signs of tapering off gains due to growth that has been continuous for most of the past decade.
The latest Current Account Deficit for Q2 came in well below expectations at -$101.5 billion, an improvement from the previous read of -$121.7 billion, which itself was revised downward from -$124 billion the last time around. The Deficit had been widening in past quarters, far higher than what we had grown accustomed to seeing about four years ago, but still nowhere near the all-time lows of nearly $216 billion, which occurred in the later years of George W. Bush’s second term — and hot on the heels of the coming Great Recession.
The U.S. has always run a balance, going all the way back to Alexander Hamilton’s methods of funding debt and bringing new loans on board. But as far as the Deficit is concerned, going back to when this Current Account data was first compiled in 1960, we didn’t start running big and consistent negative numbers until the early-to-mid 1980s. A surplus was brought back momentarily in 1991, but we’ve carried a deficit — often a very substantial one — ever since.
Housing Starts rose 9.2% in the month of August — a good sign for the struggling homebuilder industry. A full 1.282 million seasonally adjusted, annualized new starts broke ground last month, an improvement from the 1.25 million expected by analysts. And this was up from the slightly revised July read, when concerns regarding new home building — and a dearth of customers buying new homes — was in full swing.
However, August Building Permits — a forward indicator of future Starts — fell 6% last month, down to 1.229 million from July’s unrevised 1.303 million. Keep in mind the month of August often acts as an outlier for economic reads, as it’s the biggest month for taking a vacation both in the U.S. and elsewhere. Still, it’s worth keeping an eye on whether new homebuilding can shows signs of getting up off the mat.
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