Week In Review 11.8.2019

US Services data was mixed in October, but overall, the data suggested that the weakness in manufacturing activity has not been a significant drag on the rest of the economy. Still, on a 12-month average basis, services data has rolled over, as economic growth has moderated under the weight of trade and geopolitical tensions, and amid a diminishing impact from tax cuts.Factory Orders fell -0.6% in September, its second straight decline, and below the consensus of -0.5%. The drag was mostly in transportation equipment, led by civilian aircraft and ships and boats. On a y/y basis, factory orders have dropped -1.7%, the most since September 2016, led by durables, as manufacturing activity remained soft due to significant fundamental pressures.

International Trade—The trade gap hit consensus expectations at -$52.5B for September, a five-month low, and improved from August’s revised -$55.0B. On a 12-month aggregate basis, the trade deficit shrank to -$652.5 billion, which is a marginal improvement over the past few months, but still close to the widest gap since January 2009.

Consumer Sentiment ticked up 0.2 points in the preliminary November survey to 95.7. Sentiment peaked in March 2018 but remains elevated and range-bound longer-term, which suggests that consumer spending will continue to support the ongoing economic expansion. Nevertheless, the y/y momentum in sentiment has weakened, implying a slower pace of real GDP growth ahead.