Monday Moneybeat: Economic update

MARY REICHARD, HOST: Coming next on The World and Everything in It, the Monday Moneybeat.

NICK EICHER, HOST: Twice a year, the Federal Reserve issues a report on the state of American finance. 

It all grew out of the shock of 2007 and 2008: the financial crisis and connected to it, the great recession. Last week, the Fed’s “Financial Stability Report” pronounced the system “resilient,” and in testimony to Congress, Fed Chairman Jay Powell talked up the underlying strength of the American economy, particularly compared to others.

POWELL: The U.S. economy is the star economy these days.

After raising interest rates four times last year, Powell’s Federal Reserve has cut them three times this year. But he said the economy is expanding, unemployment remains at historic low levels, and inflation is in check. 

So absent a “material” shift in the economic outlook, he expects to leave rates where they are, now ranging between 1-1/2 and 1-3/4ths percent.

Powell does not see an elevated recession risk now or on the horizon, and when he compares conditions today with those that led to the need for the Financial Stability Report, he sees a well-balanced economy.

POWELL: This expansion is notable for the absence of parts of the economy that are really hot—for example, a hot housing market, where prices are moving up and there will eventually be a slowdown, in the case of the last economic downturn, you know, kind of a bust of a bubble. So we don’t have that.

Still, industrial production took a hit in October, though a good bit of it is related to the strike at General Motors. Overall, American factories’ productivity fell eight-tenths of a percent, the biggest drop since May of last year. 

Year on year, industrial production is down more than one percentage point.

REICHARD: Retail sales rebounded a modest three-tenths of a percent in October, following a drop in September. The Commerce Department figures show a year-on-year rise of 3.1 percent. 

Although the report didn’t quite match expectations, these are fourth quarter sales numbers and they give economists a reason to believe holiday sales will be strong, and will drive up Gross Domestic Product by year’s end.

EICHER: On Wall Street, stocks continued their winning streak, with the Dow Jones Industrial Average topping the 28,000 mark for the first time ever. It’s the fourth straight winning week for the Dow, and the sixth for the Standard & Poor’s 500 and the NASDAQ. Both of those indexes set records, too, with all three picking up about a percentage point in value. 

Only the smaller-company stock index, the Russell 2000, lost a little ground.

And that is today’s Monday Moneybeat.

(AP Photo/Susan Walsh) Federal Reserve Chairman Jerome Powell speaks during a news conference in Washington, Wednesday, Oct. 30, 2019. 

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