It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines:
GDP Growth Stalled in Q2
On Friday, we received some disappointing news from the Commerce Department: The U.S. economy grew just 1.2% during the second quarter. Economists were forecasting 2.4% GDP growth, so the economy underperformed their expectations by half. There were a few bright spots from this report, including a 4.2% increase in consumer spending. However, weaker business spending and inventories dragged down the economy. When you factor in the first-quarter’s 0.8% growth, the first half of this year has been the weakest since 2011. Clearly, the U.S. economy is still recovering in fits and starts so the Fed’s hands are still tied in regards to raising rates.
Durable Goods Orders Plunged In June
Another reason for the Fed to be cautious is that the Commerce Department reported that durable goods orders plunged 4% in June. This followed May’s revised 2.8% decline. For the first six months this year, durable goods orders have been flat, signaling major business uncertainty. Weak demand for commercial aircraft and defensive products are weighing down the overall durable goods number, while automotive orders remain relatively strong in the past couple months. Overall, durable goods orders have clearly stalled due to (1) More cautious business spending, (2) Brexit-fueled uncertainty and (3) Fears that a stronger U.S. dollar will continue to suppress U.S. exports.
Consumer Confidence Slips
The Conference Board also reported on Tuesday that its consumer confidence index slipped to 97.3 in July, down slightly from 97.4 in June. However, it was encouraging that the present situation component rose to 118.3 in July, up from a revised 116.6 in June. Interestingly, consumer expectations declined to 83.3 in July, down from 84.6 in June. As we enter the final lap of the Presidential race, I do expect consumer confidence to pick back up.
FOMC Leaves Key Rates Unchanged
The Federal Reserve held its two-day Federal Open Market Committee (FOMC) meeting for July earlier this week—and the results were as expected. In fact, while the Fed noted that the near-term risks to the U.S. economy have diminished, job growth improvement has slowed. So it wasn’t surprising that the Fed stood pat and voted to keep interest rates unchanged again this month.
Of course, in true Fedspeak, the Fed did hint about raising key interest rates in the upcoming months. The Fed even noted that an interest rate hike is not off the table for September yet. But given that the U.S. Presidential election is now heating up—both Hillary Clinton and Donald Trump accepted their nominations from their respective parties—the Fed isn’t likely to take action any time soon.
That’s all I have for you this week; I’ll be back online on Monday with your weekly ratings changes.
Have a great weekend,