Guest Bloggers: John Gabrielski
This weekend marks the traditional end of summer in the U.S. As it turns out, this weekend also marks the annual Federal Reserve Bank of Kansas City Economic Symposium in Jackson Hole, Wyoming.
How will Bernanke respond to the economic indicators, many of which have been moving sideways for the first three quarters of 2012? Job growth and manufacturing have been tepid. While the U.S. continues to add private sector jobs, it has not done so at a significant enough rate to reduce unemployment below 8%. Manufacturing growth has also slowed, from what may have looked like a promising start of 2% growth in Q1, to 1.7% for Q2. Results for Q3 won’t be available until October.
Consumer spending shows promise over the last few months with an increase in July of 0.4% (June was relatively flat) and an increase in personal income of 0.3%, but nothing spectacular; perhaps, a little better than moving sideways. The housing sector, usually a key component of recovery, may have bottomed out, perhaps due to a combination of low interest rates and a slow down in foreclosures, but we haven’t really seen any real uptick yet.
The U.S. stock markets continued to move sideways over the second half of the summer and are down this week seemingly awaiting Bernanke’s comments. U.S. Treasury debt prices rose and the U.S. dollar moved up against a basket of foreign currencies. Inflation appears to have slowed down, moving up only 0.1% in June for an increase of 1.7% over the last 12 months. (The Fed typically looks for a target inflation rate of 2.0%.)
What does all of that mean to Bernanke and the Fed? Has the U.S. economy turned the corner enough that the Fed will take no action or are the manufacturing job sectors still weak enough to inspire the Fed to take action? Are those weaknesses enough to cause the Fed to go to QE3? Stay tuned, we certainly will as Benanke delivers his remarks today.