Looking Behind and Looking Ahead

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Dwight Johnston, Vice President and Chief Economist for the California and Nevada Credit Union Leagues.

In this article, we’ll recap the events and news over the past month that mattered most to the economy and markets, your credit union, and your members. Then we’ll look ahead at the key upcoming events you need to know.

Behind us—Economic data remained positive, but North Korea cloud trumped fundamentals in the bond market

  • Nonfarm Payrolls growth slowed in August but remains healthy. The average monthly gain in 2017 is 156,000 vs. 186,000 in 2016.
  • Consumer Confidence remains exceptionally high and Retail Sales picked up after two slow months.
  • Auto sales declined to a pace of 16.1 million units. At least part of the weakness was due to Hurricane Harvey halting all sales for the last week of August in a large region.
  • Low mortgage rates have supported a good selling season in housing. Sales would have been higher by supply during the “season” was well below normal.
  • Concerns about North Korea continue to come and go with increasing frequency. Bond traders have reacted to the latest threat by pushing yields to the lows of 2017 for all but the two-year note.


Ahead for you
—Economic numbers will be hard to read for a few months. Many statistics will be weak, including auto sales, retail sales, and job growth. But that weakness will be reversed in subsequent months as the impacted regions recover.

  • Sept. 14—CPI—Inflation numbers now as important as jobs report as the Fed focus is on inflation
  • Sept. 15—Retail sales  
  • Sept. 20—FOMC meeting and Yellen press conference. With uncertainty regarding North Korea and the impacts of the hurricanes, the Fed might not begin the securities runoff program in September, but the Fed seems intent on doing so. The Fed can always end at any time. There is virtually no chance of a fed funds rate increase until December.  
  • Oct. 6—Jobs report
  • On any date—North Korea news or any news budget and tax reform
  • The rebound from the hurricanes will be a major economic plus in future months, but we’ll have to wade through at least two months of distorted data.


Bottom line
—This is the same thing I wrote last month, but it still applies. The economy is performing well, and you should plan accordingly going forward. But the political and geopolitical climate is rife with risk factors and could at least temporarily disrupt progress.   

Article by Dwight Johnston, Vice President and Chief Economist for the California and Nevada Credit Union Leagues.

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