Coming back from the depths
Since the Global Financial Crisis in 2007-2008, the housing market has been clawing itself out of a deep, deep hole given housing was the crux of the issue. But thanks to lower interest rates and an aging generation of “millennials” who need space for their growing families, October marked the third month in a row when the annual pace of single-family home sales was higher than 700k – the last time this happened was 2007.
Moral of the story: We’ve been seeing an increase in homeownership rates recently due to lower interest rates and an increase in home purchases would definitely help boost GDP as we head into 2020, when expectations are for growth to slow below 2% in the US.
Better than expected
Third quarter GDP was revised upward from 1.9% to 2.1% – the improvement was primarily driven by inventories and investments in structures. Business investment fell only 1% compared to the 1.3% initially estimated. The biggest component, consumer spending, was left unchanged at 2.9%. Consumer spending increased for the eighth straight month in October but spending was boosted by natural gas and electricity during the month because…wait for it…it got cold outside, so I’m mainly watching for numbers from retailers after Black Friday and Cyber Monday for a preview into holiday spending.
Moral of the story: Inventories tend to be quite volatile, and the tariffs aren’t helping this year – companies keep piling up inventories ahead of new tariffs being implemented – so the update is nbd. The update in business investment is notable because of how upstream that activity is compared to the rest of the economy. Better business investment trickles down to the labor market, which then impacts consumer spending. Given consumer confidence fell for the fourth straight month in November, the better than initially expected business investment number is a welcome change.
This week, Trump signed two bills supporting the Hong Kong protestors despite such legislation being condemned by Beijing as meddling in its domestic affairs. One bill involves an annual review of the city’s autonomy from China and the other prohibits the sale of ammunition to Hong Kong police. While protestors in Hong Kong waved American flags and posters of “Swole Trump,” this action was condemned by the governments of both China and Hong Kong. Hong Kong’s government “expressed strong opposition” to the bill while China’s Ministry of Foreign Affairs accused the United States of “sinister intentions and hegemonic nature” and threatened strong counter-measures.
Moral of the story: The situation in Hong Kong has deteriorated quite drastically and this bipartisan bill is quite symbolic. It also comes at a time when Trump is trying to put together a trade agreement with China. Unsure how this will progress when China has SAT-level mean words to say about the US.