A September Overview

The escalating trade war with China has continued to grab attention, though overall volatility has been relativity muted throughout the third quarter of 2018.  The S&P 500 and Dow Jones indices posted new highs in late September, a welcomed sign as we approach the seasonally-strong fourth quarter. 

GDP Growth – Quarter 3 GDP growth is estimated to register in the low 4% range, per the Atlanta Fed’s forecasting model, the second consecutive quarter of above 4% growth.  

Employment & Wages – Unemployment remains at 3.9% and dropping, evidence of a tight labor market.  Wage growth has ticked up slightly, leading to larger paycheck for employees.  Inflation dropped slightly from July, at 2.9% to 2.7% in August.  

Oil – Gasoline prices held at an average of $2.85 per gallon, with a slight drop likely due to seasonal patterns and blend changes.  WTI crude oil pricing has been erratic, with geopolitical concerns and the usual OPEC scrimmages introducing additional volatility.

Trade Deficit – The U.S. trade deficit is expected to widen 5%-6% in 2018.  A strong economy is increasing consumer spending, driving an increase in imports and a strengthening dollar.  At the same time, exports have declined very slightly, led by soybeans and aircraft.  Year-to-date, our trade deficit is about 7% higher than 2017. 

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