Weekly Economic Update: October 21st, 2019
• The two-year Treasury note was down just one basis point last week to 1.58%. The yield difference between the three-month Treasury bill and the ten-year Treasury note reverted to a positive yield relationship from an inversion that has existed since late May. A positively sloped yield curve could indicate that this year’s precipitous decline in yields may be ready for a pause. The Fed meets on October 30th, and the odds of a 25-basis point cut in the fed funds rate has grown to 87%.
• The I.M.F just sliced 0.3 percentage points from its April global growth forecast for 2019 to 3.0%, which would be the weakest performance since the global financial crisis a decade ago. While the I.M.F expects a rebound next year driven by a pickup of growth in emerging markets, it is still forecasting slower growth in the U.S. from an estimated 2.4% this year to 2.1% in 2020.
• In September, manufacturing output fell 0.5%, driving it deeper into recession territory. Compared to a year ago, factory production has contracted by 0.8%, the steepest negative reading since the summer of 2016—the tail-end of the energy-related slump.
• Job growth is slowing, wage increases have stagnated, and confidence levels are well off their peaks. To no surprise, consumers are becoming more cautious, shoring up savings and spending less freely.