Consumer confidence fell in October as inflation takes a toll on consumer spending. With home prices falling, and with no relief in sight from the trade deficit, it’s not a safe bet to buy.
The Federal Reserve’s latest decision to keep rates unchanged reflects investors’ concern about the state of the U.S. economy and also reflects the Fed’s caution against raising rates as a first step toward unwinding its emergency program.
On Oct. 10, the Fed made the following statement announcing its decision not to change rates at an open meeting: “In light of current economic and financial developments, the Committee decided not to change policy today. This decision should be viewed as a statement of the Committee’s current assessment of the state of the economy, and as a recognition that the recent strengthening of financial conditions has tempered some of the Committee’s longer-run projections for labor income and output.”
That same day, the U.S. Treasury released data on the trade deficit that indicated that our trade deficit increased again in the fourth quarter to $43.4 billion, up from $35.7 billion in the third quarter. At first glance, this seems to be a good time to start talking about an end to the trade deficit.
On the front end of the trade deficit, a major drop-off was reported on April 30. The trade deficit contracted by $26.2 billion in March, according to the U.S. Census Bureau. But the trade deficit in the third quarter decreased by only $5 billion. It’s a good sign for all of us; it means that the trade deficit has been going down for a while now.
But there’s a problem at the back end. This time around, the trade deficit increased by $11.6 billion in the fourth quarter. One of the reasons for the increased trade deficit is the impact of higher oil prices. Higher oil prices are a result of the fact that we produce a lot of gasoline, but import it. This is due to the fact that we have to import gasoline to run our cars. However, the higher petroleum prices will not help our