The Economy Keeps Swinging for the Fences

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U.S. consumer confidence hit a five-year high but is still off pre-crisis levels.

There were no real curve balls yesterday when the Federal Reserve raised interest rates as expected. This signaled strong support for an additional hike in December, an affirmation of the robust economy. The most significant development was the elimination of the word “accommodative” in the Fed’s comments regarding its current position on rates. Initially, investors perceived this as dovish, interpreting it as an indication of a possible Fed rain delay in the hiking cycle. This interpretation was downplayed, however, during Fed Chair Jerome Powell’s slightly hawkish Q&A.
Today investors are digesting a myriad of data points as the month, quarter and most importantly, regular major league baseball season winds down.

Here’s a wrap up:

  • The second quarter GDP 4.2% revision — Consumer spending, exports and business investment were standout contributors. Business investment, the key to productivity and higher trend GDP, revised up to an 8.7% annual increase. Triple.
  • Durable goods jumped 4.5% in August but this notoriously volatile report was up mostly due to a rebound in transportation orders. Single.
  • Initial jobless claims were up 12,000 last week but lower than expected and still at the lowest levels seen since the 1960’s. Single.
  • Pending home sales declined for the fourth month out of the last five. Home buyers are balking because prices have been surging and inventories are lacking. Strike.
  • Consumer sentiment soared to its highest level in 18 years and close to an all-time high as consumers are especially pleased with the availability of jobs in the labor market. Home Run.

Important manufacturing and payroll reports are on deck for next week. Overall, the economy is racking up runs batted in while some investors are waiting in line for popcorn and missing the action.

Please follow consumer confidence on page 58 of the Global Perspectives Book.

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