Overall Economic Outlook Continues to Give Mixed Signals
As businesses, individuals, and the government continue to keep their fingers on the pulse of the economy, it continues to give mixed signals about what the future holds. Some sectors, such as automotive sales, continue to be strong, as new jobs are added and unemployment rates continue to shrink. However, consumer confidence and consumer retail purchases paint a different picture, as people have a less positive outlook on their personal finances than anticipated.
Retail sales for the month of August were lower than expected, with consumer confidence falling to a five-month low. This news comes just a few days before the Federal Reserve has to make a decision about scaling back an $85 billion per month bond buying program designed to boost the economy. Retail purchases are up, but sales are still lower than expected. Purchases rose .2 percent for August, the lowest gain in four months, according to the Department of Commerce.
Several factors are hurting retail sales, primarily higher payroll taxes, a limited number of jobs available, and lower than expected growth in personal income. Payroll did not grow as much as expected during August, and the yield in 10 year Treasury notes is down two base points. However, the S&P 500 closed Friday up .3 percent, the best week the index has seen in two months.
Companies in the U.S. opened up 169,000 new jobs in the month of August, which was good but still fewer than projected. The unemployment level fell to 7.3 percent, the lowest level since December of 2008. However, August and July saw the worst two consecutive months in terms of payroll gains in a year.
Globally, Europe has revised their GDP growth expectations, another positive sign. The previous projections for GDP growth in Europe was 1 percent for 2013 and 1.7 percent for 2014. The new projections are a GDP growth of 1.3 percent for 2013 and 2 percent for next year.
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