In late October, the U.S. Fed cut its interest rate by a quarter-point to a range of 1.5% and 1.75%. However, they indicated that no further reductions are expected for the rest of the year. The Fed committee will be closely monitoring the economy and evaluating market conditions.
The inverted yield curve returned to normal in mid-October, signaling an optimistic outlook from investors.
Third Quarter GDP Increases at 1.9% Annualized Rate
U.S. GDP rose at an annualized rate of 1.9% at the end of the third quarter, down from the 2% rate from the second quarter. Economists had forecasted third-quarter growth to stand at 1.6%. Government expenditures grew at a 2% rate, falling from a 4.8% rate in the second quarter. Economists predict a growth rate of around 2.3% at the end of 2019, down from last year’s 2.9% rate.
Consumer spending grew at a 2.9% annualized rate, a slowdown of last quarter’s 4.6% rate. Business investment declined at a 15.3% rate, which could be attributed to the current trade war and weak global growth.
U.S. and China Trade War Persists
The U.S.-China trade war has lasted for over 15 months and has impacted aspects of the U.S. economy. In particular, U.S. manufacturing activity fell at its lowest level in more than ten years in September 2019.
Chinese exports have also been affected, falling 0.9% from a year ago. Imports continue to decrease, having dropped 6.4% year-over-year. A meeting between the U.S. and China to discuss a phase one agreement was scheduled to take place at the end of October but was canceled due to protests in the host country. U.S. tariffs on Chinese imports, including consumer technology products, are set to begin on December 15.
Co-working giant WeWork withdrew its initial public offering in late September, as mounting losses and unstable leadership contributed to its downfall. Once valued at $47 billion, the company’s valuation fell sharply to $5 billion at the end of September. WeWork will be laying off thousands of its employees in the coming months and slowing expansion to cut its losses.
Softbank agreed to take over the co-working company and invest between $4 billion and $5 billion on new and existing shares. This move would allow Softbank to control 70% or more of WeWork. After the previous WeWork CEO Adam Neumann stepped down, Softbank executive Marcelo Claure assumed leadership of the company and has been focused on turning WeWork into a profitable company.
According to the Commerce Department, retail sales fell 0.3% in September amid a slowdown of consumer spending in the nation. Several key retailers have struggled to keep afloat this year, beginning with Forever 21. The retailer filed for bankruptcy in late September and announced its plan to close at least 200 stores, citing high rental leases, shifts in consumer spending patterns, and unprofitable locations. Following a similar mindset, Office Depot has reduced its retail footprint to just over 1,300 stores around the world, as company sales were down 4% from a year ago.
A combined 96 Sears and Kmart stores are set to close by February 2020, leaving only 182 stores nationwide. It has been a difficult time for both businesses, as a changing retail environment and increased competition has left the department chains with struggling sales.