The right response to almost all economic data releases is: Next to nothing has changed with respect to the forecast—your view of the economic forecast today is different from what it was last week, last month, or three months ago in only minor ways. About the only news these past three weeks is an 0.7%-point decrease in our estimate in what production will be over April-June, driven by a reduction in estimated durable goods orders and capacity utilization. This might be an impact o Trump's trade war, plus Trump's attempts to add a trad ar with Mexico to the mix:
Federal Reserve Bank of New York: Nowcasting Report: "May 31, 2019.... The New York Fed Staff Nowcast stands at 1.5% for 2019:Q2. News from this week's data releases increased the nowcast for 2019:Q2 by 0.1 percentage point...
Specifically, it is still the case that:
- The Trump-McConnell-Ryan tax cut has been a complete failure at boosting the American economy through increased investment in America.
- But it has been a success in making the rich richer and thus America more unequal.
- And it delivered a short-term demand-side Kerynesian fiscal stimulus to growth that has now ebbed.
- U.S. potential economic growth continues to be around 2%/year.
- There are still no signs the U.S. has entered that phase of the recovery in which inflation is accelerating.
- There are still no signs of interest rate normalization: secular stagnation continues to reign.
- There are still no signs the the U.S. is at "overfull employment" in any meaningful sense.
A change from 3 months ago: The U.S. grew at 3.2%/year in the first quarter of 2019—1.6%-points higher than had been nowcast—but the growth number you want to put in your head in assessing the strength of the economy is the 1.6%/year number that had been nowcast. The falling-apart of Trump's trade negotiating strategy with China will harm Americans and may disrupt value chains, and the might be becoming visible in the data flow.
Changes from 1 month ago: Industrial production appears to be falling as new durable goods orders come in below expectations. Industrial production may have peaked last December:
A change from 1 week ago: Trump has now added a possible trade war with Mexico to the mix...
Over the past 20 years: United States manufacturers are ordering no more in the way of the nominal value of capital goods than they order two decades ago. Deflators here are very hazardous, but I believe that translates to a zero increase in real orders as well. This is unprecedented for the U.S. economy: nothing like it has happened before:
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