Last updateThu, 15 Nov 2018 4pm


Fed Beige Book Reports Concern Over Trade Environment

Economic activity expanded across the U.S., with the majority of Federal Reserve Districts reporting modest to moderate growth. New York and St. Louis indicated slight growth, overall, while Dallas reported robust growth driven by strong manufacturing, retail and nonfinancial services activity. On balance, manufacturers reported moderate output growth; however, several districts indicated that firms faced rising materials and shipping costs, uncertainties over the trade environment, and/or difficulties finding qualified workers. 

Proposed Rule Reduces Cost of Retirement Plans for Small Manufacturers

The U.S. Department of Labor announced a proposed rule would make it easier for small businesses to offer retirement savings plans to their workers through Association Retirement Plans, which would allow small businesses to band together to offer 401(k) plans to their employees.

Under the proposed rule, Association Retirement Plans could be offered by associations of employers in a city, county, state, or a multi-state metropolitan area, or in a particular industry nationwide. Sole proprietors, as well as their families, would also be permitted to join such plans. In addition to association sponsors, the plans could also be sponsored through Professional Employer Organizations (PEO). A PEO is a human-resource company that contractually assumes certain employment responsibilities for its client employers. 

U.S. Leading Economic Indicators Increased in September

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.5% in September to 111.8 (2016 = 100), following a 0.4% increase in August, and a 0.7% increase in July.

“The U.S. LEI improved further in September, suggesting the U.S. business cycle remains on a strong growth trajectory heading into 2019. However, the LEI’s growth has slowed somewhat in recent months, suggesting the economy may be facing capacity constraints and increasingly tight labor markets,” said Ataman Ozyildirim, director and global research chair at The Conference Board. “Economic growth could exceed 3.5% in the second half of 2018, but, unless the momentum in housing, orders and stock prices accelerates, that pace is unlikely to be sustained in 2019.” 

Estimates Suggest Strong Third Quarter GDP Growth

Estimates of GDP for third quarter 2018 suggest growth will remain close to its second quarter rate of 4.2%. At the low end is the Survey of Professional Forecasters’ estimate, which suggests the economy will expand 3%. At the high end is the Atlanta Fed forecast of 4.4% growth, buoyed by a rise in inventory accumulation, which is estimated to contribute 2% to third quarter growth. In addition, estimates of annualized real consumption expenditure growth in July of 2.8% are consistent with strong consumption in the third quarter. 

U.S. Tops Global Competitiveness Ranking

With a score of 85.6 out of 100, the U.S. is no. 1 in the World Economic Forum’s Global Competitiveness Report. It notably leads the Business dynamism pillar, thanks to its vibrant entrepreneurial culture, the Labor market pillar (score of 81.9 out of 100) and the Financial system (92.1) pillar. These are among the several factors that contribute to making the U.S.’ innovation ecosystem one of the best in the world (86.5, 2nd behind Germany). The country’s institutional framework also remains relatively sound (74.6, 13th). However, there are indications of a weakening social fabric (63.3, down from 65.5) and worsening security situation (79.1, 56th). 

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