Weakness in car sales continued in October, deepening the fall in sales the industry has experienced over the past three years.
This should be helped by falling interest rates.
US mortgages are generally up to 30 years in length with an option to refinance should rates fall.
With interest rates dropping, this should free up further capital for the US consumer.
US housing market
Equally, the US housing market has been relatively strong recently.
US homebuilding rebounded in October with building permits reaching their highest level in over 12 years.
When housing transactions pick up, the impact is felt across the wider economy.
While, on balance, this argues against a recession in the short-term, monetary policy, alone, seems to be delivering diminishing impact.
While the recent pivot on interest rate policy should provide some stimulus to economic growth, it is clear that we are reaching the end of monetary policy’s potential.
Quantitative easing in Europe threatens fundamentally to weaken the banking sector, reducing its profitability and curtailing its ability to lend.
There is also the concern that it supports ‘zombie’ companies - those that would fail in normal economic conditions, but are kept alive by cheap debt.
This is bad news for the long-term productive health of capitalism.
Equally, businesses remain reluctant to invest.
In some industries it has fallen to zero.
This is unlikely to pick up until there is a clearer picture on various geopolitical tensions, which looks some way off.
Business investment in the US declined by 0.8 per cent year-on-year in the third quarter, the steepest decline since the fourth quarter of 2015. Ultimately, the weakness in manufacturing will likely be felt elsewhere in the economy as companies are forced to lay off staff.
Inflation
We would also add in inflation as another concern.
Investors have dismissed inflation as a significant worry in recent years and rightly so.
It has never emerged with any real bite since the global financial crisis. However, rising food and energy prices should not be dismissed.
Our conclusion? It is tempting to follow the broadly held consensus view that the outlook is soggy.
Investors need to look for opportunity to make gains even when the economic picture is mixed.
It is imperative to look through short term softening in data and remind ourselves that there are elements that could sustain growth for some time yet, albeit at the sluggish post financial crisis levels that we have become accustomed to.
Low growth appears likely, but recession is not a given in the short term and as a result there should be reasonable opportunities to make money for investors from here for diversified and risk aware processes.
