The news of an apparent trade “deal” between the US and China has pushed back the threat of further tariffs and helped to un-invert the yield curve, but economic growth still appears to be slowing. Our tracking estimate suggests that growth slowed to 1.5% annualised in the third quarter and the incoming survey data are consistent with a further dip to 1.0% annualised in the fourth quarter. With the most reliable leading indicators, including the yield curve, building permits and jobless claims all suggesting that the risks of a recession, while still elevated, are fading, we suspect the Fed will continue to cut interest rates once or twice more over the closing months of this year.
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