Today's newsletter is coming to you from Denver International Airport, the world's flyest airport, as I head back to New York.
(Today's Smart Brevity count: 1,134 words, ~ 4 minutes.)
Photo: Zach Gibson/Getty Images. Illustration: Aïda Amer/Axios
The U.S. economy looks good to Jerome Powell.
The Fed chairman laid out his rose-colored vision of the country on Tuesday at the National Association for Business Economics conference: The economy is neither too hot nor too cold, inflation is under control, productivity is increasing, the job market is booming and the Fed is not (repeat, not!) engaging in a new quantitative easing program.
What's happening: It's becoming clear to more economists and market participants that the Fed's toolkit is losing its effectiveness and monetary policy may be powerless to protect the economy if there's a recession. So Powell has deployed a central bank's most consistent weapon: communication.
What he's saying:
1. About the unprecedented level of U.S. debt:
"Households are in good shape. Businesses are borrowing a lot and it’s something we’re monitoring carefully, but again the vulnerabilities are moderate."
2. About the possibility the Fed's loose monetary policy could overheat the economy:
"This just feels very sustainable. There’s no aspect of the economy that is booming. You’ve got a solid consumer sector where wages are going up at the level of productivity plus inflation, job creation is healthy, there’s no one sector like a housing bubble, there’s nothing like that."
3. About growing worry from investors and the business community:
"There are concerns about business investment and manufacturing and trade, of course. We don’t get to see the 11th year of an expansion a lot and there’s a lot to like about it, particularly for people at the lower end of the wage scale who are getting now the highest raises. And it’d be great to continue."
4. About why the Fed is cutting interest rates:
"I look at this as akin to the two instances in the 1990s when the Fed cut and then cut again and cut a third time. ... It provided some support for the economy and the economy took that accommodation onboard and gathered steam again and the expansion continued. That’s the spirit in which we’re doing this."
5. About the Fed injecting around $300 billion of cash to buy U.S. Treasuries in the repo market and plans to continue indefinitely. Isn't that quantitative easing?
"This is not QE. In no sense is this QE. This is nothing like it at all."
The big picture: With consumer confidence falling, leading economic indicators turning negative, the systemically important repo market in disrepair, major European economies likely in recession, the outlook for the trade war deteriorating and stock market volatility popping, Powell is doing his best to infuse confidence into the market.
Fed chairs have typically worried about inflation getting too high, but Powell confirmed on Tuesday that he is instead focused on keeping inflation from getting too low.
"It feels like the problem of this era is to keep inflation from moving down and try to keep it at 2%."
"We want inflation expectations centered right at 2%, and we really want to hammer that point and make sure that they are because we look around the world and we see disinflationary forces."
"In Japan and Western Europe where you see inflation moving down, expectations move down ... and it’s been very, very hard for economies to get off that road once they’re on it. So we don’t want to get on that road. We don’t think we’ll be exempt from these disinflationary pressures over time. For that reason we want to keep inflation at 2%."
"It’s not easy to explain that to the general public who doesn’t care whether inflation is at 1.7 or 2%. In our case, we think to serve them better we need to anchor inflation at 2% so it doesn’t begin that inexorable slide down."
September's producer price index reading was significantly weaker than forecast. The index of wholesale goods and services came in well below expectations on both month-over-month and year-over-year metrics.
By the numbers: The overall headline reading fell to its lowest level in 3 years, while the core figure, which strips out volatile food and energy prices, reached its lowest level in 2 years.
The big picture: The weak reading on wholesale prices is the latest sign that inflation is not picking up and could provide more ammo for the Fed to cut U.S. interest rates this month.
Watch this space: "This series doesn't include tariffs, so the takeaway is a bit misleading," BMO Capital Markets VP of U.S. rates strategy Jon Hill said in a note to clients.
Axios' Courtenay Brown writes: Tariffs imposed by President Trump have so far cost U.S. corporations $34 billion, according to data compiled by Tariffs Hurt the Heartland — a coalition of businesses and trade groups that oppose the tariffs — provided first to Axios.
By the numbers: The $34 billion hit that U.S. companies have taken from the Trump tariffs doesn't include the 15% tax on $112 billion worth of Chinese imports — including clothes and shoes — that went into effect on Sept. 1.
What they're saying: Jennifer Safavian, head of government affairs at the Retail Industry Leaders Association, a lobbying group that includes Walmart and Target, said in a press release...
"Confidence in the U.S. economy is waning, and leading retailers can’t successfully plan for the future when their supply chains continue to be distorted by tariffs."
A September article from The Daily Beast trumpeted the above claim that White Claw's alcoholic pond water had managed to outsell Budweiser in July.
Surprise: That may be true, Bart Watson, chief economist of the Brewers Association, told Axios at NABE.
Yes, but: When looking at the specific Budweiser brand, White Claw may have outsold it, but "only in very specific weeks," Watson said.
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