The Federal Reserve Put Returns as Data Soften
Declining capital goods orders, weaker growth outlook prompting questions about rate hikes
Speculation about a pause in the Federal Reserve’s rate hike schedule buoyed equity markets this morning after Market News cited US central banking sources to that effect overnight.
The Fed evidently has reason to be worried, with capital goods orders declining despite last year’s corporate tax cut. The Commerce Department reported at 8:30 this morning that nondefense capital goods orders excluding aircraft were flat in October after a revised 0.5% fall in September. Overall durable goods orders were down 4.4% in October, and up 0.1% excluding transportation – while the September number was revised to a 0.6% decline.
Those are very weak numbers. Year on year, nondefense capital goods orders are now roughly flat, a disappointing result in the wake of a corporate tax cut designed to encourage capital investment.
Forward-looking estimates of economic growth meanwhile have come down sharply.
The Atlanta Federal Reserve’s GDP NOW model, which translates up-to-date economic data into a GDP forecast, now puts fourth-quarter growth at about 2.5%, compared to a 4.2% forecast in early October.