From December 2015 to December 2018, the Federal Reserve raised interest rates nine times in three years. However, at the end of July and mid-September 2019, the Fed cut interest rates twice in a row. The Fed’s monetary policy has been tightened, which means that the last round of recovery in the US economy has come to an end, and the US economy has even begun to face new downward pressure. Of course, the recent market speculation is still the US Treasury yield curve upside down.
However, is the US economy really bad?
The goals of the Fed’s monetary policy include full employment, currency stability and economic growth. The US unemployment rate (seasonal adjustment) reached 3.6% in April and May 2019, the lowest value in the past 50 years, and the unemployment rate even reached 3.5% in September. Although the year-to-date growth rate of the US CPI has been lower than 2.0% since April, more importantly, the US core CPI growth rate has been above 2.0% for 18 consecutive months as of August 2019. The labor market and inflation from the perspective of both the US economy slows significantly the situation has not yet appeared, employment and prices are located in Midland comfortable reservoir interval.
In the second quarter of 2019, US GDP grew at a rate of 2.3% year-on-year, the lowest growth rate since the second quarter of 2017. Although the US economic growth rate has dropped slightly in the near future, the decline has not been large, and the phenomenon of significant stall has not yet occurred. However, from the perspective of US GDP growth, there is indeed a hidden worry about US economic growth in the second quarter of 2019. In the first and second quarters, the annual growth rate of US GDP growth was 3.1% and 2.0%, respectively, of which private consumption contributed 0.8% and 3.0% respectively, and private investment contributed 1.1% and -1.2%, respectively. For 0.7% and -0.7%, the contribution of government expenditure was 0.5% and 0.8% respectively.
It is not difficult to see that the contribution rate of private investment and net exports to economic growth has turned positive and negative in the second quarter, and the decline rate is large. Among them, the drag of private investment on economic growth is the largest since the third quarter of 2009. This means that the Trump government tax cuts have not led to a sustained recovery in corporate investment, and corporate investment may continue to weigh on US economic growth in the future. With the further escalation of Sino-US trade friction, the contribution of future net exports to the US economy may continue to be negative.
The US financial market continued to maintain a strong momentum in the 2019 period to date. Overall, the Dow Jones index, the S&P 500 index and the Nasdaq index have shown a slight upward trend in volatility so far in 2019. US 10-year bond yields have fallen from around 2.7% at the beginning of the year to around 1.5% today. Since the beginning of the year, the US dollar index has oscillated upwards, rising from 96 at the beginning of the year to the current 99. It is also possible to break the 100 in the short term. If the financial market is the vane of the real economy, then the trend of the bond market does reflect investors’ concerns, but the stock market and foreign exchange market are still strong.
Overall, from the three goals of the Fed’s attention, the US labor market and inflation are currently in an ideal state, while economic growth is slightly down, but the overall level is not low; the recent structure of US economic growth is indeed worrying, In particular, the contribution of private investment and net exports will decline rapidly, and it is still possible to continue to decline in the future; the trend of high-frequency leading indicators is even more worrying, and the possibility of both US investment and consumption weakening in the future; the overall performance of the US financial market Still strong, but the bull market in the bond market means a decline in investor confidence. In the next six months, the Fed’s interest rate cuts may slow down. The Fed will still be on the sidelines and will work hard to save policy bullets for the future economic downturn. By the time the US labor market, inflation and economic growth are simultaneously falling, the Fed’s interest rate cut will accelerate again.
Academic point of view
The future direction of the new economic geography of the new
in recent years, the development of new new trade theory, people are able to establish a multi-regional heterogeneity of business models, doing theoretical research products, and technical factors affecting the flow of friction between the area of economic activity, merging data from reality A more accurate quantitative estimate leads to a new direction of economic research: new economic geography.
This paper attempts to summarize the development of new economic geography in all directions and look forward to possible future research directions.
We believe that the future development direction of new economic geography: First, the theoretical framework will be further improved, and it can analyze and explain more facts related to capital; secondly, it will intersect with more other issues, such as corporate finance, asset pricing, etc. Finally, as microdata continues to be dig deeper, more detailed and reliable quantitative results will emerge.