Forgive me, but can someone tell me the bad news of the day? It seems I slept in and have yet to see the scary news of the day. Oh, “Thank you.” The American consumer is dead, again.
Consumer confidence fell for the fourth straight month to its lowest level since January, and the consumer expectations index was at its lowest level since November. The expectations index dropped five points, to 72.3 from 77.3, while the present situation index edged up slightly to 46.6 from 44.9 last month. Consumers’ labor market assessment was mixed, but income expectations fell, suggesting that the consumer spending that has kept the economy afloat may not last.
I doubt this news is the single reason for the market’s malaise this morning. The larger reason for its flatness, however, is something that will not pass my lips. I will not write about Europe. I will, however, mention the comments from Richard Fisher, considered one of the more hawkish members of the Federal Reserve Board. It seems he and I are singing the same song – the US economy is not falling off a cliff.
Dallas Federal Reserve President Richard Fisher brushed off concerns of looming deflationary pressures and told CNBC on Monday he believed the U.S. economy is moving in the right direction.
Of course, he is correct. Any forward movement is the right direction, but what is he seeing that many seem to be missing.
“We had an exceptional performance number in June for manufacturing here in Texas,” he said,” adding that he wouldn’t read too much into manufacturing slowdown over the past two out of three months.
The Texas economy is larger than most countries, ranking in the top 15 economies in the world. Richard sees this and he thinks, “The Fed does not need to do anymore quantitative easing.” I am now thinking more about this point of view. Is it time to let interest rates rise a bit? Would a little rise in interest rates help reduce unemployment, boost the housing market, and give households more of a reason to save money? This is the argument for higher interest rates. I just don’t know if a bit of upward pressure on interest rates would actually help. More importantly, how would the market react if it sees the Fed backing away from its current policies?
Moving out of the US, it seems another confidence survey tells another story, a story that backs up Richard Fisher’s US economic assessment, but on a global scale.
In the HSBC survey, some 71 percent of exporters, importers and traders indicated that they expect trade volumes to be unchanged or increase in the next six months. The bank cited a survey of 5,800 enterprises in 20 countries from April 10 to June 1.
Almost 6,000 businesses around the world, businesses that move products around the world, do not see the global economy falling off a cliff, at least in the next six months. It seems to me these folks have their collective finger on the global economic pulse, and if they think things are not so bad, well, I am throwing in with them. Yup, I trust them to know better than most. Then again, the huge fiscal and economic problems of Europe just won’t go away. Dang! Europe is like a mosquito buzzing around my ear when I am trying to sleep.
Trade in the day; Invest in your life
