Why the U.S Business Could Struggle in the Third Quarter

While principal U.S – made capital goods shot in July, shipments fell in the last three years, which could lead to a slowdown in economic growth in the early third quarter. This is a cause of alarm for business owners to look for cash advance alternatives.

Fed Chair, Jerome Powell revealed to the central bankers that the uncertainty of trade policies played a significant role in the slowdown as well as the weak manufacturing and capital spending in the United States.

Even though Powell described the economy as a favorable place, he also gave assurance that the central bank would act as appropriate to help in keeping the longest economic expansion in history.

Because of the slowdown in global growth as well as trade tensions, the Fed decided to slash its short-term interest rate by up to 25 points in the previous month. Following this, financial markets have also fully priced in another 25 percent cut during the Fed’s 17-18 meeting.

“The report reaffirms that industrial sector activity and business investment remain soft, in line with weakness globally as trade concerns weigh on activity,” Veronica Clark, the Citigroup economist in New York said. “With remaining downside risks, we continue to expect that the Fed will again cut rates by 25 basis points at its meeting in September,” she added.

The government noted that orders for non-defense goods, excluding aircraft increased by 0.4 percent during the previous month. This was because of the strong demand for electrical equipment, components, and appliances.

When data was revised, it was realized that capital goods had advanced to 0.9 percent instead of bursting 1.5 percent as it was previously reported.

The economists thought that the core capital goods would fall by 0.1 percent in July, but they instead increased by 1.5 percent annually.

Shipment of capital goods recorded a fall of 0.7 during the previous month, which was the most significant drop since October 2016. The government uses core capital goods shipment to calculate the country’s gross domestic product.

When data for June was revised, it was realized that core capital goods had stagnated instead of surging to 0.3 percent as it had been earlier reported.

President Donald Trump announced a new round of tariffs on Friday on Chinese imports. This came hours after Beijing had unveiled retaliatory tariffs U.S goods worth $75 billion. The two economic powerhouses on Monday resorted to easing tensions with Beijing sorting to calm and Trump showing signs of a deal.

AUTHOR BIO: As the FAM account executive, Michael Hollis has funded millions by using cash advance solutions. His experience and extensive knowledge of the industry has made him finance expert at First American Merchant.