Yesterday’s manufacturing release hit global markets hard.
With the weakest performance in a decade, eyes are on the consumer. If they can’t keep spending, the longest expansion in our history may end.
Stephen Gallagher explains, “The economy is running on one engine, and that’s the consumer.”
But consumers face tough issues.
There’s the US/China Trade war. Plus, interest rates and monetary policy that make the dollar too strong. The result? More pressure on manufacturers struggling to compete.
Add weakening capital investments and modest job gains. It’s the perfect storm.
Enter economic “stall speed.” It’s an aviation term – the slowest a plane can fly while staying level.
When expansion fell below 2%, contraction followed.
But economists are confident the US can dip to the 1-1.5% level without crashing.
And analysts forecast GDP growth to slow to 1.7% in the coming year.
Demographic changes may be to blame. Slowed population growth and stagnant productivity add fuel to the fire.
As Fels and Balls explain, “…it doesn’t take much to tip over an economy that is moving along at stall speed.”
Read more here.