Auto Sales Weak In Beige Book
The Fed’s Beige Book report was released Wednesday. That’s where the Fed gives its update on how it sees the economy now and where it might be going in the future. The key term was that there is modest to moderate growth which Steve Liesman says means 2% growth. This makes sense because the economy has grown about 2% this year and this entire recovery. Even though the current quarter and past quarter did better than this long run rate, it’s best not to get overly optimistic since the effects from hurricane Harvey haven’t been estimated yet. I’m looking forward to seeing tomorrow’s unemployment claims report because that will have the first effects from the hurricane.
The Beige Book includes economic analysis from the 12 Federal Reserve banks from early July into August. The weakest portion of the report was the auto sector with Cleveland seeing a 16% decline in year to date in production at auto assembly plants. The Beige Book said, “contacts in many Districts expressed concerns about a prolonged slowdown in the auto industry.” This is the worst part of the economy, but the cars which were destroyed in the storm will need to be replaced, so we’ll see if there’s an uptick in September and October. This catalyst came at a great time as Autodata reported August sales declined to the worst rate in over 3 years and inventories are rising.
Cohn Takes A Hit
There was news out of Washington on Wednesday that Gary Cohn won’t be the next Fed chairperson. Personally, I thought he had very little shot at being picked because he has no monetary policy experience. However, the reason President Trump won’t be picking him has nothing to do with his qualifications. It’s because of Cohn’s criticisms of President Trump’s Charlottesville response. This is understandable because the President doesn’t seem to want to appoint people who aren’t on his side. However, it also makes this pick very uncertain because any of the potential candidates can criticize one of his actions. Weirdly, Yellen is the top candidate on this PredictIt list even though her entire Jackson Hole message was against President Trump’s proposed repeals of financial regulations. The main reason why she’s on top is because the last time President Trump spoke of her, it was positive. Also, Fed chairs are routinely reappointed. Finally, there isn’t a clear replacement, so bettors just go with the easiest choice.
