U.S. Fed Chairman Powell assessed the U.S. economy as being in a “good place,” and recent data have affirmed that it continues to grow, well supported by healthy consumption. Indeed, consumer spending is offsetting headwinds from weak exports and business investment, and the outlook for U.S. consumers appears bright, with low unemployment, wage growth, an above 8% savings rate, and low debt-to-income ratios supporting future spending.
On the other side of the equation, manufacturing continues to flash red, a common global theme at this point, as the trade slowdown constrains growth, particularly in emerging Asia, where exposure is high, as well as in Europe and China. As such, the news of phase one of the U.S.-China trade détente is welcome. It will likely stem negative growth momentum and could lead to stabilizing growth trends in 2020. We continue to believe that global recession will be avoided, and we may be in the midst of a bottoming process in Europe, where Germany, with a heavy reliance on exports, sits in the vortex of global supply chains.