Thursday, 15 November, 2018

Stock market falls again as GDP report shows economic weakness

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Elsie Buchanan | 29 October, 2018, 11:30

While that was a slowdown from a 4.2% pace in the second quarter, it still exceeded the economy's growth potential, which economists put at 2%. By buying more, the importers seem to have anticipated, in July and August the second round of tariffs on chinese goods imposed in September. During the past 4 quarters, GDP has grown 3.0 percent. Investment spending in new residences has now fallen for three quarters (nine months) in a row and the decline seems to be picking up.

Joseph LaVorgna, chief economist for the Americas at Natixis:"Nonresidential fixed investment, which covers a panoply of firm-wide expenditures, increased less than 1 percent last quarter".

"The big swings in trade and inventories between the second and third quarters are likely at least partially due to changes in activity associated with trade policy", said Daniel Silver, an economist at JPMorgan in NY. World GDP would fall further should Trump follow through on all his trade threats, including global duties on cars, the International Monetary Fund said.

They noted that Friday's GDP report showed business investment slowed dramatically in the third quarter, growing at an annual rate of just 0.8 per cent, the weakest in almost two years, after a much stronger 8.7 per cent gain in second quarter. Companies paused spending earlier than some economists expected given the fiscal boost from Republican-backed tax cuts.

China's economic growth is expected to reach around 6.6 percent in 2018, according to a research report jointly released by Economic Information Daily, Xiamen University and University of London on Thursday. The dollar briefly rose to a two-month high against a basket of currencies on the data.

"Every time we do something great, he raises interest rates", Trump said in an interview this week with the Wall Street Journal in which he again said he viewed the Fed as the "biggest risk" facing the economy "because I think interest rates are being raised too quickly". US Treasury yields fell.

Oil falls on oversupply worries despite Iran sanctions
He is a daily contributor to Fox Business Network where he provides daily market updates and analysis. But if oil demand continues to rise-and Iranian exports are curtailed-prices could rise dramatically.


A 3.5% growth in the 3rd quarter is the second strongest in the past four years, after the 2nd quarter of 2018.

Gregory Daco, chief US economist for Oxford Economics, said he expects more modest GDP growth in coming quarters, citing the fading impact of the tax cuts, higher interest rates from the Federal Reserve and increasing trade tensions. But some private economists worry that the recent stock market declines could be a warning signal of a coming slowdown. Excluding food and energy, the central bank's preferred price index also rose at a 1.6% rate. That was the fastest pace since the fourth quarter of 2014 and followed a 3.8 per cent pace of increase in the second quarter.

On Friday, October 26, the US stock market fell again.

Total exports fell 3.5 per cent, the weakest showing since the end of 2016, while imports gained 9.1 per cent, the fastest growth since the end of previous year.

The economy has been expanding in the 2 percent range in the past few years, but growth spiked in the second quarter, boosted by consumer spending and exports. Shares of Caterpillar Inc., an economic bellwether, tumbled this week after the maker of mining and construction equipment said manufacturing costs were higher due to rising material and freight costs.

Housing remained a weak spot, posing the third consecutive drag on GDP growth, with a contraction of 4%.

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