Here’s the thing.
People keep talking about the Fed Exit, and the economy achieving escape velocity, and the jobs market returning to normal.
But a lot of the data just isn’t that impressive.
This morning, Ben Casselman at WSJ takes a look at some of the weak US growth numbers:
There also are signs that consumers—whose spending has helped prop up the economy for much of the past year—are beginning to tighten their belts. Retail sales grew a paltry 0.4% in June, Commerce Department figures showed, and would have been even worse if higher gasoline prices hadn’t forced drivers to spend more at the pump.
“This year is proving to be more challenging than we had originally planned,” Howard Levine, chairman and chief executive of discount retailer Family Dollar Stores Inc., told investors earlier this month. “The consumer is just more challenged than we had anticipated.”
Sales at restaurants—a key source of recent job growth, adding more than 150,000 positions over the past three months—tumbled last month, suggesting consumers could be pulling back on discretionary spending.
In a note, SocGen examines what this means from an interest rate perspective:
The soft patch and ongoing dovish talk from Bernanke may support further Treasury consolidation ahead, though not necessarily in a sleepy mode like Friday. We’ll be watching very closely the 2.39-2.41% support – if broken that would open the door for a quick rally towards 2.20%. That would be a surprise to us: we expect that support to hold. As explained in our last 18 July FIW, the muted US Treasury price recovery, despite dovish talk and soft data, suggests there aren’t many shorts around.
Meanwhile, keep an eye on the housing data. Much of it remains strong, but some numbers, like housing starts have begun to fade lately.
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