Consumers Pull Back on the Reins
Downward drifting consumption data will be hard-pressed to grow much faster than 1.5% in the third quarter, which suggests slowing GDP growth.
The economic data this week continued to be mixed with weak durable goods orders, personal spending, and pending home sales data offset by higher home prices and reduced initial unemployment claims. However, none of the news seemed to deter the Federal Reserve in its intent to reduce bond purchases in the short run.
There is an increasing number of Fed governors who seem to believe that there has been enough bond buying, and that the program wasn't terribly effective, anyway. And unless the economy is falling apart, they want to begin to taper bond purchases now. Still, there are some governors who continue to believe that the economy is in a fragile state. Without clear evidence of an accelerating economy, these governors are more reluctant to make any changes. This smaller group may try to resist the calls for reducing bond purchases.
Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.