Month of July 2019

• Employment: Total employment increased by 224,000 in June after adding only 72,000 (revised) new
jobs in May. The average monthly job gain so far in 2019 is 172,000 per month (223,000 in 2018).
Notable employment increases for June occurred in professional and business services (51,000), health
care (35,000), and transportation and warehousing (24,000). The unemployment rate inched up by 0.1 percentage point to 3.7% in June. The number of unemployed persons increased slightly to 6.0 million in
June (5.9 million in May). The labor participation rate was 62.9% and the employment-population ratio
was 60.6% in June. The average workweek was unchanged at 34.4 hours for June. Average hourly
earnings increased by $0.06 to $27.90. Over the last 12 months ended in June, average hourly earnings
have risen 3.1%.

• FOMC/interest rates: As expected, the Federal Open Market Committee lowered interest rates by 25
basis points following its latest meeting in July. Lack of price inflation and slowing global economic
growth underscored the Committee's decision to reduce the target range for the federal funds rate to
2.00%-2.25%. The vote to reduce rates was 8-2, with dissenting members opting to leave rates
unchanged.

• GDP/budget: Economic growth appears to have slowed in the second quarter, according to the initial,
or "advance," estimate of the gross domestic product. The second quarter grew at an annualized rate of
2.1%. The first quarter saw an annualized growth of 3.1%. Consumer prices and spending increased in
the second quarter, rising 2.3% and 4.3%, respectively. Pulling the GDP down in the second quarter
were negative contributions from fixed business investment (equipment, software, structures, etc.) and
exports. The federal budget deficit was only $8.5 billion in June ($74.9 billion in June 2018). Through the
first nine months of the fiscal year, the government deficit sits at $747.1 billion. Over the same period for
fiscal year 2018, the deficit was $607.1 billion.

• Inflation/consumer spending: Inflationary pressures remain weak as consumer prices rose 0.1% in
June and are up 1.4% over the last 12 months ended in June. Consumer prices excluding food and
energy increased 0.2% in June and 1.4% since June 2018. In June, consumer spending rose 0.3%
(0.5% in May). Personal income and disposable (after-tax) personal income climbed 0.4% in June,
respectively.

• The Consumer Price Index increased 0.1% in June, the same increase as in May after rising 0.3% in
April and 0.4% in March. Over the 12 months ended in June, the CPI rose 1.6%. Energy prices held
overall consumer prices in check, falling 2.3% in June. Prices less food and energy rose 0.3% in June —
the largest monthly increase since January 2018. Core prices (less food and energy) are up 2.1% over
the last 12 months. In contrast, over the same period, the energy index has fallen 3.4%.

• According to the Producer Price Index, the prices companies received for goods and services rose 0.1%
in June after increasing 0.1% in May and 0.2% in April. The index increased 1.7% for the 12 months
ended in June. Prices for services increased 0.4%, offset by a 0.4% drop in prices for goods. The index
less foods, energy, and trade services was unchanged in June after moving up 0.4% in May, and has
increased 2.3% over the last 12 months.
• Housing: Activity in the housing market can be described as erratic at best. Existing home sales fell
1.7% in June after climbing 2.5% in May. Year-over-year, existing home sales are down 2.2%. Existing
home prices continue to rise, as the June median price for existing homes was $285,700 — an all-time
high. Existing home prices were up 4.3% from June 2018. Total housing inventory for existing homes for
sale in June increased to 1.93 million (1.91 million in May), representing a 4.4-month supply at the
current sales pace. Sales of new single-family houses rebounded in June, surging a robust 7.0% over
May's revised total. Sales in May fell a whopping 8.2%. New home sales are now 4.5% ahead of their
June 2018 estimate. The median sales price of new houses sold in June was $310,400 ($303,500 in
May). The average sales price was $368,600 ($371,200 in May). Inventory at the end of June was at a
supply of 6.3 months (6.7 months in May).

• Manufacturing: According to the Federal Reserve, industrial production was unchanged in June after
increasing 0.4% in May. For the second quarter as a whole, industrial production declined at an annual
rate of 1.2%, its second consecutive quarterly decrease. In June, a nearly 3.0% increase in motor
vehicles and parts contributed significantly to the 0.4% gain in manufacturing output. Utilities fell 3.6% as
milder-than-usual temperatures in June reduced the demand for air conditioning. Total industrial
production was 1.3% higher in June than it was a year earlier. After falling 1.3% in May, durable goods
orders jumped 2.0% in June. New orders for capital goods used by businesses to produce consumer
goods rose 1.4% in June after plummeting 6.5% the prior month. Core capital goods (excluding defense
and aircraft) increased 1.9% last month.

• Imports and exports: In another sign that global inflationary pressures continue to be weak, import
prices fell 0.9% in June after recording no change (revised) in May. This is the first monthly decline since
a 1.4% decline in December 2018. Import prices decreased 2.0% over the past 12 months — the largest
year-over-year decline since import prices fell 2.2% for the 12-month period ended in August 2016.
Import fuel prices declined 6.5% in June following a 2.3% advance the previous month. The June
downturn was the first monthly decline in import fuel prices since a 13.3% drop in December 2018.
Excluding fuel, import prices fell 0.3% for the second consecutive month in June. Export prices fell 0.7%
in June after decreasing 0.2% in May. The June decrease was the largest monthly drop since export prices declined 0.8% last November. Export prices decreased 1.6% for the year ended in June, the
largest 12-month decline since prices plummeted 2.4% for the year ended in August 2016. The latest
information on international trade in goods and services, out July 3, is for May and shows that the goods
and services deficit was $50.5 billion, down from the $51.92 billion deficit in April. May exports were
$210.6 billion, $4.2 billion higher than April exports. May imports were $266.2 billion, $8.5 billion more
than April imports. Year-to-date, the goods and services deficit increased $15.7 billion, or 6.4%. Exports
increased $5.1 billion, or 0.5%. Imports increased $20.8 billion, or 1.6%. The advance report on
international trade in goods (excluding services) revealed the trade deficit to be $74.2 billion in June,
down $0.9 billion from May's deficit. Goods exports in June were $3.7 billion less than the prior month,
while imports of goods were $4.6 billion less than May's imports.

• International markets: Boris Johnson of the Conservative Party became Britain's new prime minister,
vowing to lead that country out of the European Union even with no Brexit deal in place. Meanwhile, the
European Central Bank gave indications it would cut short-term interest rates and restart a program of
buying bonds in an attempt to stem the tide of the worsening European economy. In Japan, consumer
prices stagnated in June and have risen a scant 0.7% since June 2018 — yet another sign of tepid global
inflationary pressures. China's gross domestic product advanced at an annualized rate of 1.6% for the
second quarter and at a 6.2% year-over-year rate. This growth has come despite the trade impasse with
the United States.

• Consumer confidence: After showing signs of concern in June, the Conference Board Consumer
Confidence Index® rebounded in July, up to 135.7 from June's 124.3. The Present Situation Index —
based on consumers' assessment of current business and labor market conditions — increased from
164.3 to 170.9. The Expectations Index — based on consumers' short-term outlook for income, business
and labor market conditions — increased from 97.6 in June to 112.2 in July.