3rd QUARTER 2019 ECONOMIC NEWSLETTER

October 8, 2019

By: Harris L. Kempner, Jr. President
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The United States economy still appears to be taking two quite different paths. On the one hand, the American consumer remains strong and it looks as if with a savings rate of now 8% it can continue to stay that way through the year and into 2020. The strength of the consumer is crucial because we represent 70% of our total economy and as long as we are spending freely, the economy will likely continue to move forward.

But at what pace? And here is where the division comes in. Manufacturing in many parts of this country, due to a series of reasons, is in a near recession. These reasons have to do with the various trade negotiations that are not yet concluded and are in many cases are still being fought with tariffs. It also has to do with uncertainties about oil supply and costs caused by the attack on the Saudi oil processing plants and oil fields.

There is also the specter of Congress which is almost certainly going to be more pre-occupied with possible impeachment and the debate around it than they will be with doing policies which may help improve the economy in some way. We think that they will get through the necessary spending bills and there may be economic riders attached, but in the main, we think that legislation of any substantial potential is off the table for now. This is, of course, both good and bad for certain industries, but is not necessarily good for the economy overall.

So, solely due to the strength of the consumer, we expect, for now, that the economy will stay out of recession in 2020 but with a growth adjusted for inflation of less than 2%. This could be changed for the better if we can make a trade deal with China, but otherwise, probably not.