Month: March 2019

The Markets (as of market close March 22, 2019)

Last week started well for investors as stock indexes continued to climb on the heels of the prior week’s robust performance. However, reports of a weakening global economy prompted a sell-off last Friday, plunging each of the benchmark indexes listed here lower. With a pronouncement from the Federal Reserve that it is hesitant to raise interest rates for fear of slowing domestic economic growth further, investors sold stocks and sought long-term bonds, pushing yields lower (as bond prices rise, yields fall). Last Friday’s manufacturing report for the eurozone showed industrial output sank, particularly in Germany, as its purchasing manager’s index fell to its lowest rate in several years. Each of the indexes listed here posted losses, led by the small caps of the Russell 2000, which fell more than 3.0%. Year-to-date, the Nasdaq is comfortably in the black at over 15%, ahead of the S&P 500, Russell 2000, Global Dow, and the Dow.

Oil prices inched higher last week, closing at $58.97 per barrel by late Friday, up from the prior week’s closing price of $58.38 per barrel. The price of gold (COMEX) rose again last week, closing at $1,313.40 by last Friday evening, up from the prior week’s price of $1,302.20. The national average retail regular gasoline price was $2.548 per gallon on March 18, 2019, $0.077 higher than the prior week’s price but $0.050 less than a year ago.

Market/Index	2018 Close	Prior Week	As of 3/22	Weekly Change	YTD Change
DJIA	23327.46	25848.87	25502.32	-1.34%	9.32%
Nasdaq	6635.28	7688.53	7642.67	-0.60%	15.18%
S&P 500	2506.85	2822.48	2800.71	-0.77%	11.72%
Russell 2000	1348.56	1553.54	1505.92	-3.07%	11.67%
Global Dow	2736.74	3022.78	2995.76	-0.89%	9.46%
Fed. Funds target rate	2.25%-2.50%	2.25%-2.50%	2.25%-2.50%	0 bps	0 bps
10-year Treasuries	2.68%	2.58%	2.44%	-14 bps	-24 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic Headlines

• The Federal Open Market Committee maintained the federal funds rate at its current range of 2.25%-2.50%, following the Committee’s meeting last week. According to the FOMC statement, the labor market remains strong, but growth of economic activity has slowed in the fourth quarter. In addition, recent indicators point to slower growth of household spending and business fixed investment in the first quarter of 2019. On a 12-month basis, overall inflation has declined, largely as a result of lower energy prices; inflation for items other than food and energy remains near the Committee’s 2% objective. As to the timing of future interest rate increases, the Committee will be patient in light of global economic and financial developments and muted inflation pressures. There are no rate hikes projected this year unless circumstances change dramatically enough to warrant an increase.
• Finally, good news from the housing sector as the National Association of Realtors® reported that existing home sales enjoyed their largest month-over-month gain since December 2015, when sales expanded by 11.8% in February. Sales of single-family existing homes rose by 13.3% for the month. The median existing-home price in February was $249,500, up 3.6% from February 2018 ($240,800). Sales cut into the inventory of available existing homes for sale, which fell from a 3.9-month supply in January to a supply of 3.5 months in February.
• The government deficit jumped to $234 billion in February. January saw a government budget surplus of $8.7 billion. Government receipts were significantly lower in February compared to January ($167.3 billion to $340 billion), while government outlays rose from $331 billion in January to $401 billion last month. Through the first five months of the fiscal year, the deficit sits at $544 billion — $153 billion higher than the comparable period last fiscal year.
• For the week ended March 16, there were 221,000 new claims for unemployment insurance, a decrease of 9,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 9. The advance number of those receiving unemployment insurance benefits during the week ended March 9 was 1,750,000, a decrease of 27,000 from the prior week’s level, which was revised up 1,000.

Eye on the Week Ahead

The end of the month and first quarter of 2019 is upon us. The second estimate of the fourth-quarter gross domestic product isn’t expected to change much from its initial estimate, which had the GDP increase by 2.6%. The housing sector is also front and center with the latest reports on housing starts and new home sales.

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The Markets (as of market close March 15, 2019)

Tech shares were bullish last week, leading the way for what turned out to be a very strong performance in the market. The tech-heavy Nasdaq outperformed each of the other benchmark indexes listed here and leads in overall year-to-date performance. Bond yields sank to their lowest level since January as prices soared on weak inflation reports (bond yields fall as bond prices rise). Signs that global and domestic economic growth may be slowing, coupled with lagging inflation, may be giving investors confidence that U.S. and foreign central banks will temper a push to increase interest rates.

Oil prices climbed higher last week, closing at $58.38 per barrel by late Friday, up from the prior week’s closing price of $55.99 per barrel. The price of gold (COMEX) rose again last week, closing at $1,302.20 by last Friday evening, up from the prior week’s price of $1,298.70. The national average retail regular gasoline price was $2.471 per gallon on March 11, 2019, $0.049 higher than the prior week’s price but $0.088 less than a year ago.

Market/Index	2018 Close	Prior Week	As of 3/15	Weekly Change	YTD Change
DJIA	23327.46	25450.24	25848.87	1.57%	10.81%
Nasdaq	6635.28	7408.14	7688.53	3.78%	15.87%
S&P 500	2506.85	2743.07	2822.48	2.89%	12.59%
Russell 2000	1348.56	1521.88	1553.54	2.08%	15.20%
Global Dow	2736.74	2940.82	3022.78	2.79%	10.45%
Fed. Funds target rate	2.25%-2.50%	2.25%-2.50%	2.25%-2.50%	0 bps	0 bps
10-year Treasuries	2.68%	2.63%	2.58%	-5 bps	-10 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic Headlines

• Is economic growth slowing? Some indicators may be pointing in that direction. The Consumer Price Index increased only 0.2% in February after being unchanged the prior month. Excluding the volatile food and energy groups, consumer prices advanced just 0.1%. Over the last 12 months, the CPI has increased a relatively scant 1.5%. The index less food and energy rose 2.1% over the last 12 months, a slightly smaller figure than the 2.2% increase for the period ended in January. The latest CPI, coupled with the February producer price report and the January retail sales figures, suggest inflationary pressures are back to being relatively flat.
• Prices for goods at the retail level increased 0.2% in January following a 1.6% drop in December. For the 12 months ended in January, retail prices are up 2.3%. Excluding auto sales, which were very weak in January, retail sales advanced 0.9% over December. Sales, excluding motor vehicles and gas stations, experienced a monthly gain of 1.2% in January. Online trade climbed 2.6% in January and is up 7.3% from a year ago. While January’s data is positive, it doesn’t come close to recouping December’s drop in retail prices — the largest in almost 10 years.
• The Producer Price Index edged up 0.1% in February after falling 0.1% in both January and December. For the 12 months ended in February, producer prices are up 1.9%. Prices producers received for goods increased 0.4% in February, led by energy prices, which rose 1.8%. Prices for goods, less food, and energy, inched up 0.1%. Prices for services were unchanged in February after a 0.3% hike in January.
• Sales of newly constructed homes continue to lag. According to the latest report from the Census Bureau, sales of new single-family homes in January were 6.9% below December’s rate and 4.1% under the January 2018 estimate. The median sales price of new houses sold in January was $317,200. The average sales price was $373,100. There was a 6.6-month supply of new houses for sale across the country in January.
• The manufacturing sector posted some positive data in January. New orders for durable goods increased 0.4% over December’s figures. This is the third consecutive increase in new orders, following a 1.3% jump in December. A 1.2% advance in transportation equipment, which has been up five of the last six months, drove the increase. Excluding transportation, new orders for durable goods slipped 0.1%. Shipments of durable goods fell 0.5% in January. This increase, up three consecutive months, followed a 1.3% December increase. Inventories of manufactured durable goods in January, up 24 of the last 25 months, increased 0.4%. This followed a 0.3% December advance. Nondefense new orders for capital goods in January increased 2.5%, shipments declined 1.6%, and inventories increased 0.5%.
• The number of job openings increased by roughly 100,000 in January compared to December. Job openings increased in a number of industries, with the largest increases in wholesale trade (91,000), real estate and rental and leasing (60,000), and information (42,000). The job openings level decreased in other services (98,000), retail trade (97,000), and arts, entertainment, and recreation (40,000). January saw about 5.8 million new hires and 5.6 million total separations (including quits and layoffs).
• Industrial production edged up 0.1% in February, according to the Federal Reserve. Manufacturing production fell 0.4% in February for its second consecutive monthly decline. Pushing the industrial production index higher were utilities, which rose 3.7%, and mining, which increased 0.3%. Overall, industrial production was 3.5% higher in February than it was a year earlier.
• Prices for both imports and exports rose 0.6%, respectively, in February. The rise in import prices was largely driven by higher fuel prices. Despite the February increase, import prices declined 1.3% from February 2018 to February 2019. Over the same 12-month period, export prices have risen 0.3%.
• For the week ended March 9, there were 229,000 new claims for unemployment insurance, an increase of 6,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims remained at 1.2% for the week ended March 2. The advance number of those receiving unemployment insurance benefits during the week ended March 2 was 1,776,000, an increase of 18,000 from the prior week’s level.

Eye on the Week Ahead

The Federal Open Market Committee meets this week for the first time since January. Interest rates haven’t changed since last December, so it’s possible the Committee hikes rates 25 basis points following its meeting.

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The Markets (as of market close March 8, 2019)

The benchmark indexes listed here suffered their worst showing last week since December. Hardest hit was the Russell 2000, which fell over 4.0%. Unsettling global economic news had investors scrambling for cover from stocks. The prospects of a trade deal with China suddenly took a turn for the worse after several weeks of promising rhetoric. Adding to the turmoil was last Thursday’s decision by the European Central Bank to offer additional stimulus to spur economic activity in the European Union. In addition, Chinese exports fell and U.S. job growth was marginal at best in February. All of these factors led to a fear that the economy may be slowing. While stock prices dropped, long-term bond prices rose, as did the price of gold.

Oil prices inched higher last week, closing at $55.99 per barrel by late Friday, up from the prior week’s closing price of $55.74 per barrel. The price of gold (COMEX) climbed higher last week, closing at $1,298.70 by last Friday evening, up from the prior week’s price of $1,294.20. The national average retail regular gasoline price was $2.422 per gallon on March 4, 2019, $0.032 higher than the prior week’s price but $0.138 less than a year ago.

Market/Index	2018 Close	Prior Week	As of 3/8	Weekly Change	YTD Change
DJIA	23327.46	26026.32	25450.24	-2.21%	9.10%
Nasdaq	6635.28	7595.35	7408.14	-2.46%	11.65%
S&P 500	2506.85	2803.69	2743.07	-2.16%	9.42%
Russell 2000	1348.56	1589.64	1521.88	-4.26%	12.85%
Global Dow	2736.74	3006.41	2940.82	-2.18%	7.46%
Fed. Funds target rate	2.25%-2.50%	2.25%-2.50%	2.25%-2.50%	0 bps	0 bps
10-year Treasuries	2.68%	2.75%	2.63%	-12 bps	-5 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic Headlines

Note: Due to the government shutdown, some affected federal agencies are providing reports for December, while others have information available for January. These monthly reporting differences are noted below.

• Total employment gained only 20,000 new hires in February, according to the latest report from the Bureau of Labor Statistics. There were 311,000 new hires in January. The unemployment rate fell 0.2 percentage point to 3.8% as the number of unemployed persons decreased by 300,000 to 6.2 million. Notable job gains occurred in health care (21,000) and wholesale trade (11,000), while construction lost 31,000 workers. The labor force participation rate held at 63.2% in February, the same as January. The employment-population ratio, at 60.7%, was unchanged over the month. The average workweek decreased by 0.1 hour to 34.4 hours in February. Average hourly earnings rose by $0.11 to $27.66, following a $0.02 gain in January. Over the year, average hourly earnings have increased by 3.4%.
• For January, the government budget enjoyed an $8.7 billion surplus. For the first four months of the fiscal year, the government is running at a $310.3 billion deficit ($175.7 billion over the same period last fiscal year). Government receipts totaled just shy of $340 billion in January. Individual income taxes provided the bulk of receipts for the month. January expenditures were $331 billion, led by Social Security payments ($86 billion) and national defense outlays ($52 billion). Also of note, for the current fiscal year to date, the government has received about $570 billion in individual income taxes ($603 billion in fiscal 2018) compared to $60 billion in corporation income taxes ($76 billion in fiscal year 2018).
• Housing starts gained some ground in January, jumping up 18.6% over December’s paltry total. Home completions climbed 27.6% from December and building permits increased by 1.4% in January.
• This week’s report from the Census Bureau on new residential sales covers December. Next week’s report will be for January. In December, sales of new single-family homes increased by 3.7% over November’s total. New home sales are still 2.4% below their December 2017 rate. The median sales price of new houses sold in December 2018 was $318,600 ($303,500 in November). The average sales price was $377,000 ($357,600 in November). Available inventory increased to a supply of 6.6 months — about the same as November.
• The international trade deficit for goods and services was $59.8 billion in December, up $9.5 billion from November. December exports were $3.9 billion less than November exports, and imports in December were $5.5 billion more than the prior month. For 2018, the goods and services deficit increased $68.8 billion, or 12.5%, from 2017. Exports increased $148.9 billion, or 6.3%. Imports increased $217.7 billion, or 7.5%. Final figures for 2018 showed trade surpluses with some countries, including Hong Kong ($31.1 billion), Netherlands ($24.8 billion), Australia ($15.2 billion), and Belgium ($14.2 billion). Trade deficits were recorded with other trade partners, with the largest including China ($419.2 billion), European Union ($169.3 billion), Mexico ($81.5 billion), Germany ($68.3 billion), and Japan ($67.6 billion).
• Economic activity in the non-manufacturing (services) sector expanded in February, according to the latest Non-Manufacturing ISM® Report On Business®. Business activity and new orders grew over January. However, survey respondents noted that employment and prices fell in February.
• For the week ended March 2, there were 223,000 new claims for unemployment insurance, a decrease of 3,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims dropped back to 1.2% for the week ended February 23. The advance number of those receiving unemployment insurance benefits during the week ended February 23 was 1,755,000, a decrease of 50,000 from the prior week’s level.

Eye on the Week Ahead

Government reporting agencies are playing a bit of “catch-up” with economic data following the partial government shutdown. The Consumer Price Index is for February (current), while the retail sales report is for January (delayed). As such, it’s a bit harder to compare current consumer spending with retail sales. Also available this week is the first of two reports on new home sales. This week’s report covers December, while next week’s information will be for January.

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The Markets (as of market close March 1, 2019)

The momentum stocks have enjoyed since the beginning of the year waned some last week as investors took time to consider economic and trade developments. The tech-heavy Nasdaq gained the most, up almost 1.0%. At the other end of the spectrum was the Global Dow, which fell 0.15%. In between, the Dow and the Russell 2000 almost broke even, while the S&P 500 pushed ahead by about 0.4%. For the year, the major indexes listed here are still doing quite well. The Dow and S&P 500 are off to their best start to a year in over 30 years, while the Nasdaq has enjoyed 10 straight weeks of positive returns.

Oil prices fell for the first time in several weeks, closing at $55.74 per barrel by late Friday, down from the prior week’s closing price of $57.16 per barrel. The price of gold (COMEX) dove last week, sinking to $1,294.20 by last Friday evening, down from the prior week’s price of $1,330.20. The national average retail regular gasoline price was $2.390 per gallon on February 25, 2019, $0.073 higher than the prior week’s price but $0.158 less than a year ago.

Market/Index	2018 Close	Prior Week	As of 3/1	Weekly Change	YTD Change
DJIA	23327.46	26031.81	26026.32	-0.02%	11.57%
Nasdaq	6635.28	7527.54	7595.35	0.90%	14.47%
S&P 500	2506.85	2792.67	2803.69	0.39%	11.84%
Russell 2000	1348.56	1590.06	1589.64	-0.03%	17.88%
Global Dow	2736.74	3010.94	3006.41	-0.15%	9.85%
Fed. Funds target rate	2.25%-2.50%	2.25%-2.50%	2.25%-2.50%	0 bps	0 bps
10-year Treasuries	2.68%	2.65%	2.75%	10 bps	7 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Economic Headlines

Note: Due to the government shutdown, some affected federal agencies are providing reports for December, while others have information available for January. These monthly reporting differences are noted below.

• According to the initial estimate, the gross domestic product increased at an annual rate of 2.6% in the fourth quarter of 2018. The third-quarter GDP increased 3.4%. Pulling the GDP lower in the fourth quarter were decelerations in private inventory investment, personal consumption expenditures, and federal, state, and local government spending. On the plus side, exports and nonresidential (business) fixed investment increased from the third quarter. Imports, a negative in the calculation of GDP, fell in the fourth quarter, which helped push the GDP rate higher.
• The personal income and outlays report is favored by the Federal Reserve as an inflation indicator. Due to the recent partial government shutdown, the current report combines estimates for income and outlays for December, but only income estimates for January. Consumer income rose 1.0% in December but fell 0.1% in January. Disposable, or after-tax, income dropped 0.2% in January after vaulting 1.1% in December. Wages and salaries climbed 0.5% in December and 0.3% in January. On the other hand, personal interest income advanced 0.6% in December but plummeted 1.3% in January. Dividend income rose 7.2% in December but fell 6.3% in January. Consumer spending decreased 0.5% in December. Consumers spent less on both goods and services in December. Within goods, recreational goods and vehicles was the leading contributor to the decrease. Within services, the largest contributor to the decrease was spending for household electricity and gas.
• The latest report on new home construction from the Census Bureau is for December. Building permits were 0.3% higher over the last month of 2018 compared to November. However, single-family permits in December were 2.2% below the November figure. Home construction was also lagging in December. Housing starts for the month were 11.2% lower than November’s total. Single-family starts were 6.7% below November’s rate. Housing completions were 2.7% off in December, and single-family home completions were only 0.1% higher than in November.
• To facilitate a faster return to the normal processing and release schedule following the lapse in funding, there will not be an advance report on international trade in goods issued for January or February 2019. The latest report is for December. The international trade deficit was $79.5 billion in December, up $9.0 billion from $70.5 billion in November. Exports of goods for December were $135.7 billion, $4.0 billion less than November exports. Imports of goods for December were $215.2 billion, $5.0 billion more than November imports.
• Survey respondents to the IHS Markit final U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) survey indicated that manufacturing slowed noticeably in February. The index was 53.0 for the month, down from 54.9 in January, slipping to the lowest rate since August 2017. While production remained steady, new orders fell to their lowest rate since last June.
• Following the Markit report, the Institute for Supply Management® (ISM®) also noted activity slowed in the manufacturing sector in February with its PMI® falling 2.4 percentage points from the January reading. New orders, production, employment, and prices all decreased in February.
• For the week ended February 23, there were 225,000 new claims for unemployment insurance, an increase of 8,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims rose 0.1% to 1.3% for the week ended February 16. The advance number of those receiving unemployment insurance benefits during the week ended February 16 was 1,805,000, an increase of 79,000 from the prior week’s level, which was revised up by 1,000.

Eye on the Week Ahead

The employment figures for February are out this week. Over 300,000 new jobs were added in January, so a reduction is expected for February. Wage inflation has been tepid for the most part, rising a little over 3.0% in 2018.

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The Markets (as of market close February 28, 2019)

Each of the benchmark indexes listed here posted positive monthly gains, led by the Russell 2000, which lapped the field after gaining over 5.0% for the month. The small-cap index is almost 17.0% ahead of its 2018 closing value. Signs that a trade accord with China may be in the offing helped stimulate investors to trade throughout February. Also, word from the Federal Reserve that it may not raise the target interest rate range as aggressively as proposed last year has had a positive impact on stocks. Corporate earnings season continued on a relatively positive trend, while energy stocks rebounded as oil production was curbed, sending gas prices at the pumps higher. Overall, following the Russell 2000, the Dow posted the next highest monthly gain ahead of the Nasdaq, S&P 500, and the Global Dow.

By the close of trading on February 28, the price of crude oil (WTI) was $57.26 per barrel, up from the January 31 price of $53.95 per barrel. The national average retail regular gasoline price was $2.390 per gallon on February 25, up from the January 28 selling price of $2.256 but $0.158 lower than a year ago. The price of gold dipped by the end of February, falling to $1,314.40 by close of business on the 28th, down from $1,325.70 at the end of January.

Market/Index	2018 Close	Prior Month	As of February 28	Month Change	YTD Change
DJIA	23327.46	24999.67	25916.00	3.67%	11.10%
NASDAQ	6635.28	7281.74	7532.53	3.44%	13.52%
S&P 500	2506.85	2704.10	2784.49	2.97%	11.08%
Russell 2000	1348.56	1499.42	1575.55	5.08%	16.83%
Global Dow	2736.74	2945.73	3000.97	1.88%	9.65%
Fed. Funds	2.25%-2.50%	2.25%-2.50%	2.25%-2.50%	0 bps	0 bps
10-year Treasuries	2.68%	2.63%	2.71%	8 bps	3 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Month’s Economic News

Note:  Due to the partial government shutdown earlier last month, information from some reporting agencies is delayed.

• Employment: Total employment rose by 304,000 in January after adding 222,000 (revised) new jobs in December. The average monthly job gain in 2018 was 223,000. Notable employment increases for January occurred in leisure and hospitality (74,000), construction (42,000), health care (42,000), and food services and drinking places (37,000). The unemployment rate jumped from 3.9% in December to 4.0% in January. The number of unemployed persons increased to 6.5 million. The impact of the partial federal government shutdown contributed to the uptick in these measures. The labor participation rate rose 0.1% from December to 63.2% in January. The employment-population ratio also advanced 0.1% to 60.7%. The average workweek was unchanged at 34.5 hours for the first month of the year. Average hourly earnings increased by $0.03 to $27.56. Over the last 12 months, average hourly earnings have risen $0.85, or 3.2%.
• FOMC/interest rates: The Federal Open Market Committee did not meet in February, after leaving interest rates unchanged in January. The next FOMC meeting is scheduled for March 19 and 20.
• GDP/budget: The advance estimate of the fourth-quarter gross domestic product showed the economy grew at an annualized rate of 2.6%. The GDP expanded at a rate of 3.4% in the third quarter. Of note, consumer spending rose by 2.8%, despite a sharp decline in December retail sales. Also of note, business investment rose 6.2% for nonresidential fixed investment. On the other hand, residential investment was weak, falling by 3.5%. The federal budget deficit was $13.54 billion in December. For the three months of fiscal year 2019, the government deficit is $319 billion. Over the same period for fiscal year 2018, the deficit was $225 billion.
• Inflation/consumer spending: The report on consumer income and spending, one that is favored by the Federal Reserve as an inflation indicator, showed personal income increased 1.0% in December while it decreased 0.1% in January (the report has income and expenditures for December and only income for January). Disposable (after-tax) income increased 1.1% in December but fell 0.2% in January. Consumer spending (personal consumption expenditures) decreased 0.5% in December.
• The Consumer Price Index was unchanged in January following no change in December. Over the previous 12 months, the CPI rose 1.6%. Core prices, which exclude food and energy, climbed 0.2% for the month and were up 2.2% over the previous 12 months.
• According to the Producer Price Index, the prices companies received for goods and services dropped 0.1% in January following a 0.1% decrease in December. Tumbling energy and food prices helped drive producer prices lower. Over the 12 months ended in January, producer prices increased 2.5%.
• Housing: Following a mundane 2018, the housing sector continues to lack steam entering the new year. Sales of existing homes fell 1.2% in January after plunging 6.4% in December. Year-over-year, existing home sales were down 8.5%. The January median price for existing homes was $247,500, down from $253,600 in December. Existing home prices were up a relatively scant 2.8% from January 2018. Total housing inventory for existing homes for sale in January increased to 1.59 million, up from 1.53 million existing homes available for sale in December. There was no government report on new home sales in February (for December). That report is scheduled for release on March 5.
• Manufacturing: The manufacturing sector lost steam in January as industrial production fell 0.6% following a 0.1% advance in December. In January, manufacturing production fell 0.9%, primarily as a result of a large drop in motor vehicle assemblies; factory output excluding motor vehicles and parts decreased 0.2%. The latest figures on durable goods orders from the Census Bureau are for December (again, due to the government shutdown). New orders for manufactured durable goods increased 1.2% following a 1.0% jump in November. Transportation led much of the increase, as new orders excluding transportation increased only 0.1% in December.
• Imports and exports: The latest information on international trade in goods and services, out February 6, is for November. For that month, the goods and services deficit was $49.3 billion, down $6.4 billion from October’s figures. November’s exports were $1.3 billion less than October exports. Imports were $7.7 billion less than October imports. Year-to-date, the goods, and services deficit increased $51.9 billion, or 10.4%, from the same period in 2017. The advance international trade in goods report for December showed the trade deficit sat at $79.5 billion, up $9.0 billion from $70.5 billion in November. Exports of goods for December were $135.7 billion, $4.0 billion less than November exports. Imports of goods for December were $215.2 billion, $5.0 billion more than November imports.
• International markets: In Great Britain, Prime Minister Theresa May was unable to gain parliamentary approval of the exit deal she negotiated with the European Union. In addition, there does not appear to be a package that the British government can agree on, leading to the likelihood that the March 29 scheduled UK exit from the European Union will be delayed. On a larger scale, world trade regressed in 2018 as the trade war between the United States and China pulled the reins on global economic growth. According to the CPB Netherlands Bureau for Economic Policy Analysis, total goods trade across borders slowed from a 4.7% increase in 2017 to a 3.3% gain in 2018.
• Consumer confidence: The Conference Board Consumer Confidence Index® increased in February following a decline in January. The index now stands at 131.4, up from 121.7 in January. The Present Situation Index, which gauges how consumers feel about current business and labor market conditions, improved in February, as did consumers’ outlook for income, business, and labor market conditions over the short term.

Eye on the Month Ahead

Gains in the market last month were due, in large part, to apparent progress made in trade negotiations between the United States and China. Whether an accord is actually reached in March remains to be seen. Economic data has been a mixed bag through the first few months of the new year. Inflation has been subdued; manufacturing — and more importantly, business investment in capital goods production — has also been marginal. As the first quarter comes to an end, look for more current information on the state of the economy as the government reporting agencies catch up with data.

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