Weekly Economic Update: August 19th, 2019
• Volatility in the stock market forced investors into the safety of short-term U.S. Treasury bonds. The two-year Treasury note declined 16 basis points last week from a yield of 1.64% to a yield of 1.48%. The 3-month Treasury bill increased it’s inversion to the ten-year note from minus 25 basis points to minus 30 basis points. The increased inversion is a strong signal to the FOMC that they need to consider easing by 50 basis points at their next meeting in September.
• Germany’s GDP contracted again in the second quarter while Chinese markets continue to slow. Slumps in U.S. manufacturing should continue to be a drag on U.S. growth for the remainder of 2019.
• The increase in Personal Consumption in Q2 has been supporting the economy. Personal Consumption increased by a formidable 4.3% annual rate in the second quarter, accounting for all of the 2.1% growth in GDP.
• The University of Michigan reported on Friday that consumer sentiment took a big hit in early August, falling to the lowest level since January. If consumer spirits continue to sink and translate into weaker spending behavior, the odds of a recession sooner than later would increase significantly.