MARY REICHARD, HOST: Coming next on The World and Everything in It, the Monday Moneybeat.
NICK EICHER, HOST: First quarter 2019’s in the books. The government will not have GDP, gross domestic product, numbers together until about four weeks from now.
Here’s what we do know: The stock market had its best quarter in nearly a decade. All the major stock indexes finished with double-digit gains for the first three months of this year, no April fooling.
What we did learn, though, is the Commerce Department issued its final revision on GDP for the 4th quarter last year. And it’s a revision down—from 2.6 percent last quarter to 2.2. It’s a big drop.
That downward revision means that year on year, GDP growth was 2.98 percent instead of 3.08 percent up over the previous year. Straight up 3 percent growth is the Trump administration promise and goal: that its economic program of low taxes and low regulation will produce that kind of private-sector growth. The number is still within the 3 percent rounding range, but that 4th quarter slowdown is notable.
REICHARD: Right, and so is the January consumer spending number. It came in at a very weak 0.1 percent month-on-month increase. That followed a six-tenths percentage-point drop in December.
Consumer spending accounts for about 70 percent of GDP, and so that’s not a good sign.
There is a bright spot, though, in one sector of the economy that had been lagging: the housing market. New home sales jumped almost 5 percent in February. So for the first two months of the year, new home sales are about 3 percent higher versus last year.
Falling mortgage-interest rates helped drive that. They’d hit a recent high in December, but have dropped back today almost a full percentage point.
EICHER: White House economic adviser Larry Kudlow last week called on the Federal Reserve to cut interest rates one-half of a percentage point. He emphasized it’s not an emergency and that he respects the independence of the central bank to set a target rate for the cost of borrowing.
That said, after four rate hikes last year and a total of nine in three years, Kudlow’s concerned about the slowing global economy, and possible spillover effects to the American economy. He said the Fed could stand to undo some of those interest rate hikes. Kudlow, appearing on CNBC, cited historically low unemployment here, rising wages and productivity, and strong corporate earnings.
KUDLOW: We want to keep it that way. And in the absence of inflation, with some of these global threats, our view is at some point I wouldn’t mind seeing the Fed drop their target rate.
Higher interest rates typically act as a brake on economic growth, and the Fed increases interest rates when the economy’s going well to guard against price inflation.
And that is today’s Monday Moneybeat.