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Investing Specialists

An Economy in the Middle: No Boom, No Bust

Economic data this week was slow enough to keep central bank stimulus flowing yet good enough to avert recession fears, writes Morningstar’s Bob Johnson.

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The markets loved the economic data this week. Slowing, or at least plateauing, economic data meant that central bankers would not be tightening anytime soon. Later in the week, data, including the employment report, showed that while the economy wasn't exactly bursting at the seams, there was an extremely low probability that the U.S. economy would slip back into the abyss.

Central banks did indeed react to some of the weakness, with the European bankers finally reducing their target interest rate and the Fed affirming that it has no plans to reduce its interventions in the near future. This news helped soothe the markets some, but there were still a few worries that maybe the U.S. economy was just a little too weak. Retail data has been soft for some time, and the ISM Manufacturing Indexes slipped yet again this week. Auto sales, which had previously shown absolutely no impact from the fiscal cliff debates or the payroll tax, slipped ever so slightly in April. However, the initial unemployment claims report on Thursday and the employment report on Friday were surprisingly good, assuaging some of those fears. Meanwhile, the real estate market continued its generally upward trajectory, especially in terms of increased prices.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.