Ahead of Wall Street - August 30, 2012 - Ahead of Wall Street
30 Agosto 2012 - 10:59AM
Zacks
Thursday, August 30, 2012
A mix of inline domestic and weak international data provides
the backdrop for Bernanke’s Jackson Hole speech on Friday. On the
home front, the Personal Income & Spending data for July was
roughly in-lline with expectations, while the weekly initial
Jobless Claims data was a tad bit weaker than expected. Beyond the
U.S. shores, the weak data out of Japan, Europe, and South Korea
this morning again reminded us of the worldwide economic
challenges.
Today’s July Personal Income & Outlays report shows that the
U.S. economy started the current quarter on a firmer footing than
was the case in the second quarter. Consumer spending increased at
a better than expected 0.4% pace in July following the flat reading
in June and a drop in May. This is inline with what we had seen in
the positive July Retail Sales data and provides some confirmation
of positive momentum on this key front. Personal Income growth also
came in-line with expectations, up 0.3% in July after the 0.3% gain
in June (revised down from up 0.5% originally reported).
On a related note, we got August same-store sales data this
morning, with number of retailers including Target
(TGT), Gap (GPS), Macy’s (M), and
Nordstrom (JWN) posting better than expected
numbers.
Consumer spending, the biggest driver of the economy, increased
at a 1.7% pace in the second quarter, revised higher in Wednesday’s
second reading from the 1.5% originally reported but below the
first quarter’s 2.4% pace. For the economy’s growth momentum to
improve in the current quarter and back half of the year, consumer
spending needs to rise from the second quarter’s pace. But that
will be possible only the labor market starts showing sustainable
signs of improvement. This morning’s somewhat disappointing Jobless
Claims data indicates that the modestly improving trend of recent
weeks still remains in place. We will get a better picture of the
labor market from the August non-farm payroll numbers coming out
next Friday. But a number along the lines of what we got in July
would generally be looked at favorably.
It is far from clear what all of this means for Fed policy and
the market’s tentativeness of recent days shows exactly that. Many
serious market watchers remain of the opinion that the economy’s
condition is not precarious enough to warrant fresh Fed support.
They point to Wednesday’s 1.7% GDP growth rate in the second
quarter and expectations of 100K-plus jobs in next Friday’s Jobs
report as evidence in support of this claim. This morning’s July
Personal income & Outlays reading would also fall in that
category.
I am of the view that more Fed action is largely irrelevant to
the issues facing the U.S. economy. Neither lack of liquidity nor
higher interest rates are hurdles for the economy at present; in
fact both of those variables remain quite supportive already.
Fiscal issues on the home front and a slowing international economy
are the issues holding the economy back and more Fed action will do
little to help out on those fronts.
Sheraz Mian
Director of Research
NORDSTROM INC (JWN): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
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