Thank you to all the educators who are here with us in Washington or are joining us online. I look forward to responding to your questions. But first, I have a few thoughts about the vital work you do as economics educators and its connection to what the Federal Reserve is trying to accomplish. I promise to be brief, because it is a school night.
I am here today, and the Fed has organized this event, because of the importance of economics education. Some of your students may go on to become professional economists, but all of them, I hope, will apply the valuable lessons and the skills they have gained from economics in other careers and in others aspects of their lives.
Studying economics can benefit students in multiple ways. The lessons of economics are valuable in a wide variety of vocations. Moreover, the knowledge gained will empower students as consumers, managers of their own finances, and as informed citizens. Economics has been consistently useful to me over my career in law, finance, and government service. It is, of course, central to my current role as a monetary policymaker and financial regulator.
In government, economic analysis is one of the principal tools we use in making policy decisions. Among other things, economics is an essential facet of the science of public policy. What policies actually work? Which ones sound good but don't work, or are actually counter-productive? Economics gives us the tools to answer those questions and help us make the best the decisions on behalf of the public.
Of course, economics is not only the basis for judgments and decisions made by the Fed and other government agencies. It also underpins the countless decisions by consumers, businesses, and investors that drive economic activity. The concepts you teach and apply in the classroom guide those decisions and even help explain human behavior outside of the workings of the economy. For example, to continue to grow and succeed, any business owner should understand the differences between fixed cost, variable cost, average cost, and marginal cost. Businesses and investors need to understand present or discounted value, but so should any parent or grandparent starting a college fund. Economics teaches us about the power of incentives, which are central to thinking about and understanding regulatory and tax policy. But incentives also help motivate people in a variety of other settings, such as encouraging students to do their best in school, helping reduce traffic jams, or even nudging someone to save more or to exercise regularly. Economics is a practical and powerful tool for understanding how we relate to each other.
The global economy started 2019 with the weakest monthlyexpansion of business activity since September 2016. The JPMorganGlobal PMI, compiled by IHS Markit, hit a 28-month low of 52.1,down from 52.7 in December, extending a slowdown that had beenevident throughout 2018 into the new year.
Manufacturing led the slowdown, with factory output rising atthe slowest pace in 31 months and slipping closer to stagnationamid an increased rate of decline in worldwide export volumes.However, the service sector likewise reported a weaker rate ofexpansion, showing the smallest gain since September 2016 as theslowdown broadened out and uncertainty spiked higher.
Other indicators added to the gloomier picture. New ordersexpanded at the slowest rate since July 2016 and a secondsuccessive marginal decline in backlogs of work hinted at thedevelopment of spare capacity.
Job creation hit a 21-month low as hiring slowed in response tothe weakened order book trend and darkened prospects. Optimismtowards the year ahead regained some ground from December'stwo-and-a-half year low, but remained subdued by recent standardsand well below levels seen this time last year.
US and India buck slowdown trend
Data for goods on a Census basis are compiled from the documents collected by U.S. Customs and Border Protection (CBP) and reflect the movement of goods between foreign countries and the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, and U.S. Foreign Trade Zones. They include government and non-government shipments of goods and exclude shipments between the United States and its territories and possessions; transactions with U.S. military, diplomatic, and consular installations abroad; U.S. goods returned to the United States by its Armed Forces; personal and household effects of travelers; and in-transit shipments. The General Imports value reflects the total arrival of merchandise from foreign countries that immediately enters consumption channels, warehouses, or Foreign Trade Zones.
For imports, the value reported is the CBP-appraised value of merchandise—generally, the price paid for merchandise for export to the United States. Import duties, freight, insurance, and other charges incurred in bringing merchandise to the United States are excluded. The exception is exhibit 17a, which shows CIF import value. The CIF (cost, insurance, and freight) value represents the landed value of the merchandise at the first port of arrival in the United States. It is computed by adding import charges to the customs value and therefore excludes U.S. import duties.
Exports are valued at the f.a.s. (free alongside ship) value of merchandise at the U.S. port of export, based on the transaction price including inland freight, insurance, and other charges incurred in placing the merchandise alongside the carrier at the U.S. port of exportation.
Revision procedure (Census basis)
Monthly revisions: Monthly data include actual month's transactions as well as a small number of transactions for previous months. Each month, the U.S. Census Bureau revises the aggregate seasonally adjusted (current and real, or chained-dollar) and unadjusted export, import, and trade balance figures, as well as the end-use totals for the prior month. Country detail data and commodity detail data, based on the Standard International Trade Classification (SITC) Revision 4 and the North American Industry Classification System (NAICS), are not revised monthly. The timing adjustment shown in exhibit 14 is the difference between monthly data as originally reported and as recompiled.
(Tempe, Arizona) – Economic activity in the non-manufacturing sector grew in January for the 108th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.
The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: “The NMI® registered 56.7 percent, which is 1.3 percentage points lower than the December reading of 58 percent. This represents continued growth in the non-manufacturing sector, at a slower rate. The Non-Manufacturing Business Activity Index decreased to 59.7 percent, 1.5 percentage points lower than the December reading of 61.2 percent, reflecting growth for the 114th consecutive month, at a slower rate in January. The New Orders Index registered 57.7 percent, 5 percentage points lower than the reading of 62.7 percent in December. The Employment Index increased 1.2 percentage points in January to 57.8 percent from the December reading of 56.6 percent. The Prices Index increased 1.4 percentage points from the December reading of 58 percent to 59.4 percent, indicating that prices increased in January for the 20th consecutive month. According to the NMI®, 11 non-manufacturing industries reported growth. The non-manufacturing sector’s growth rate cooled off in January. Respondents are concerned about the impacts of the government shutdown but remain mostly optimistic about overall business conditions.”
The 11 non-manufacturing industries reporting growth in January — listed in order — are: Transportation & Warehousing; Health Care & Social Assistance; Mining; Accommodation & Food Services; Wholesale Trade; Finance & Insurance; Utilities; Real Estate, Rental & Leasing; Construction; Professional, Scientific & Technical Services; and Public Administration. Seven non-manufacturing industries reported contraction in January in the following order: Retail Trade; Educational Services; Information; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Management of Companies & Support Services; and Other Services.What respondents are saying“Business has slowed well below expectations as our customers deal with the effects of economic situations exacerbated by the government shutdown.” (Construction)“The government shutdown is not affecting our business at this time.” (Finance & Insurance)“Prices are volatile due to tariff restrictions.” (Management of Companies & Support Services)“We are trying to hold out through the government shutdown. Currently, our work is continuing with already obligated prior-year funds. We have not had to suspend any activities. The shutdown is affecting the United States Agency for International Development’s [USAID] and the Department of State’s ability to process actions, share information or plan for the future. That is the shutdown’s effect on us. The longer it lasts, the greater the disruption.” (Professional, Scientific & Technical Services)“Apprehension regarding overall economic conditions due to uncertainly of the partial government shutdown, its effect on business climate and lack of national strategic direction. Economic activity remains strong locally; however, there is concern that this may change quickly due to uncertainty and reports of slowing economic indicators.” (Public Administration)“Order input stable, and supplier deliveries growing. The industry is struggling with capacity constraints.” (Real Estate, Rental & Leasing)“Things are steady. We’re trying to mitigate any impact of the tariffs.” (Retail Trade)“The shutdown and potential delay in tax refunds will hurt our business.” (Wholesale Trade)“Central processing unit (CPU) shortages continue to impact fulfillment of orders.” (Transportation & Warehousing)ISM® NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM® NON-MANUFACTURING AND ISM® MANUFACTURING SURVEYS*JANUARY 2019 Non-ManufacturingManufacturingIndexSeries Index JanSeries Index DecPercent Point ChangeDirectionRate of ChangeTrend** (Months)Series Index JanSeries Index DecPercent Point ChangeNMI®/ PMI®56.758.0-1.3GrowingSlower10856.654.3+2.3Business Activity/ Production59.761.2-1.5GrowingSlower11460.554.1+6.4New Orders57.762.7-5.0GrowingSlower11458.251.3+6.9Employment57.856.6+1.2GrowingFaster5955.556.0-0.5Supplier Deliveries51.551.50.0SlowingUnchanged3756.259.0-2.8Inventories49.051.5-2.5ContractingFrom Growing152.851.2+1.6Prices59.458.0+1.4IncreasingFaster2049.654.9-5.3Backlog of Orders52.550.5+2.0GrowingFaster1350.350.0+0.3New Export Orders50.559.5-9.0GrowingSlower2451.852.8-1.0Imports52.053.5-1.5GrowingSlower1153.852.7+1.1Inventory Sentiment60.559.0+1.5Too HighFaster259N/AN/AN/ACustomers' InventoriesN/AN/AN/AN/AN/AN/A42.841.7+1.1Overall EconomyGrowingSlower114Non-Manufacturing SectorGrowingSlower108Non-Manufacturing ISM®Report On Business® data is seasonally adjusted for the Business Activity, New Orders, Prices and Employment Indexes. Manufacturing ISM®Report On Business® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries Indexes.**Number of months moving in current direction.Indexes reflect newly released seasonal adjustment factors.Commodities reported up/down in price and in short supplyCommodities Up in Price
Beef; Electrical Components (2); Labor (4); Steel Products (16); and Vinyl Products.Commodities Down in Price
Dairy Products; Diesel (2); Fuel (3); Gasoline (3); Laboratory Supplies; and Unleaded Fuel.