US Outlook Report: U.S. Economy Muddling Along
Do you ever get the feeling you are just going through the motions, muddling through, but your heart just isn’t in it. Well that’s how the U.S. economy’s performance has felt over the last six months. Just as the Fed was about to sound the all clear and start normalizing short-term U.S. interest rates, and consumer spending growth was set to climb to new expansion highs on rising stock prices, improving job prospects, and declining oil prices, the economy has instead taken a step or two backwards since the second half of 2014.
A worsening trade performance and declining business investment and industrial production have dominated the economic landscape, while consumers so far have hunkered down and saved the gas price decline windfall. This week we can add existing home sales for April, the Kansas City Manufacturing index for May, and the Chicago National Activity index for April to the long and growing list of economic indicators that continue to fall short of economist forecasts.
To give you a sense of how bad the U.S. economy and other economies around the world have been missing the mark of late, we take a look at a number economic surprise indexes that currently show some large negative values. China and the U.K. stand out in this regard, and even the Eurozone has turned negative of late. Japan, in contrast, is bucking the global trend.
Bottom-line, we are seeing an economic bounce in U.S. economic activity in the second quarter, but it’s shaping up to be quite weak, and still below most economist expectations. More homebuilding and consumer spending is expected in the second half of the year, but not enough to wipe away the poor start to the year. The Fed will remain in wait-and-see mode this quarter, and the Fed “dot plot” of rate hike expectations for 2016 and 2017 could be scaled back yet again at the June FOMC meeting.
To find out more, check out this week’s US Outlook Report.
Tags: economy