Awaiting a rate cut in the United States

The economic situation is mixed in the Unites States. In August, retail sales, which account for almost half of consumer spending, increased 0.3%, below both the expected 0.5% and July’s 0.5%. Without motor vehicles and parts, sales declined 0.4%. Considering the persistent decline of housing and the stock market instability, consumer confidence could rise only a fraction in the third quarter from the second quarter gains of 1.4%. The Federal Reserve should lower rates by 25-50 basis points during Tuesday, September 18th meeting and might cut rates again before year end. In fact, in August, industrial production increased only 0.2%, compared to July’s 0.5%, and less than the expected 0.3%. On a yearly basis, industrial production was 1.7% higher than a year before, while manufacturing increased 1.7% during the same period and declined 0.3% month over month. Industrial capacity utilization, on the other hand, stayed stable at 82.2% from 81.7%, but manufacturing capacity utilization slipped to 80.7% from July’s 81.0%.