In the past few weeks, fears of a double-dip recession have ebbed. August retail sales were better than expected. The number of people filing for unemployment claims has fallen for two weeks in a row.
The trade deficit for July was much narrower than forecasts. That's crucial since a ballooning trade gap in June was the primary reason why the nation's gross domestic product in the second quarter was revised lower.
Still, the economy is not healthy. The latest bits of manufacturing data have been disappointing. The housing market may not have hit bottom yet. Builder Beazer Homes USA (BZH) lowered its forecast for new home orders on Wednesday.
And even with jobless claims falling, companies don't seem to be comfortable enough to start hiring again. Some are still getting rid of workers. FedEx (FDX, Fortune 500) said Thursday it was cutting 1,700 jobs.
For these reasons, the Fed is likely to stress -- as it has since March 2009 -- that it expects to keep interest rates "exceptionally low" for "an extended period of time." (Rates have been near 0% since December 2008.)
The fed needs to keep interest rates low, however, it needs to do more than that to encourage firms to invest. The economic outlook is not as bleak as it was in previous weeks, but companies are still very hesitant about investing in capital in an economy with struggling consumer demand and the uncertainty of future pricing
ReplyDelete