Sat, Aug 17, 2019 - Page 10 News List

Consumers buoy US amid headwinds

WARNING SIGNS:New reports showed a slowing global economy has dragged on US manufacturing and a trade war has undermined business confidence and investment

AFP, WASHINGTON

US consumers appear to be carrying the country’s economy in their shopping carts as manufacturing slumps amid US President Donald Trump’s trade conflict with China, and financial signals warn of a possible recession.

“The economy is phenomenal,” Trump said on Thursday. “We had a couple of bad days, but we are going to have some very good days, because we had to take on China.”

However, despite his cheerleading, a raft of new US data reports showed a mixed picture on the economy, leading Wall Street to post a modest recovery from its worst day of the year.

Global financial markets remain concerned about slowing European and Chinese economies, which caused a closely watched recession signal to flash red, sending stocks worldwide down 2 percent or more on Wednesday.

Longer-term bond yields continued to fall, with the 30-year US Treasury bond dropping below 2 percent for the first time ever, while the 10-year hit the lowest point in three years as investors sought safe havens to hedge against a possible downturn.

Trump continued to call on the US Federal Reserve to cut interest rates, saying that it made a “big mistake” by increasing too fast.

Fed Chairman Jerome Powell “should be cutting rates. Every country all over the world is cutting. We want to stay sort of even,” Trump told reporters.

The US manufacturing sector, which declined in the first two quarters of this year, putting it in recession, last month slumped again and is now down 1.5 percent this year, the Fed reported.

That came on the heels of other data showing that the US-China trade war has undermined business confidence and is curtailing investment amid the uncertainty.

“It is hard to avoid the conclusion that the industrial sector is being dragged down by overseas developments,” RDQ Economics analysts John Ryding and Conrad DeQuadros said.

Their analysis highlighted “the impact of tariffs on supply chains, and the effects of uncertainty about these policies may have had in subduing capital spending.”

Although Trump has made boosting manufacturing a central focus of his economic policies, the sector has made up a dwindling share of the US economy.

Even before Trump gave retailers an early Christmas bonus by delaying tariffs on more than half the US$300 billion in Chinese goods targeted for new 10 percent punitive duties, Americans’ spending habits were buoying the economy.

That trend continued last month, the first month of the third quarter, as retail sales jumped 0.7 percent, far more than expected, driven by e-commerce and Amazon.com Inc’s 48-hour “Prime Day,” new US Department of Commerce data showed.

“The United States is now, by far, the Biggest, Strongest and Most Powerful Economy in the World, it is not even close!” Trump said on Twitter. “As others falter, we will only get stronger. Consumers are in the best shape ever, plenty of cash.”

Walmart Inc — which has been beefing up its online presence to compete with Amazon — added to the good retail news, reporting better-than-expected profits in the latest quarter and boosting its forecast for the year.

“Households are in good shape with spending and that should continue as long as the labor market remains healthy,” National Retail Federation chief economist Jack Kleinhenz said.

However, he warned that financial market volatility and “increased trade tensions in recent weeks may put a wind of caution in consumer spending as we move forward in 2019.”

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