What’s Going On Here?Fresh data out on Thursday showed the US economy didn’t grow as quickly as it was expected to last quarter, but determined Americans are going to keep giving it their best shop. What Does This Mean?The US economy’s annualized growth of 6.5% looks good on paper, sure, but there were two smudges on Thursday’s update. First, that growth was well below the 8.4% investors were expecting. And second, it was barely any improvement on the first quarter’s 6.3%, even though lockdown restrictions have kept easing. You can’t sell what you don’t have, after all, and supply shortages mean there’s a lot the US doesn’t have.
But you can’t fault American shoppers: they’re doing their best to stimulate the biggest part of the US economy, personal consumption, which grew at an annualized rate of 11.8% – its second-biggest gain since 1952 (tweet this). Clearly government stimulus checks and rapid job growth are working wonders… Why Should I Care?For markets: The Fed isn’t going anywhere.
Bad news for the economy could spell good news for markets, which might be why US stocks actually rose on Thursday. Weak data means the US Federal Reserve (the Fed) is more likely to stick to the support measures – near-zero interest rates and monthly bond purchases – that have been propping up markets so far. The Fed’s admitted as much, saying as recently as this week that there’s a lot of progress to be made before it thinks about stepping back.
The bigger picture: A boost in waiting.
The US president’s ambitious economic plans got a big push forward this week after the US senate approved a $550 billion infrastructure deal. That’s less than the proposed $2 trillion-plus, but anything is better than nothing after the deal looked like it might trip at the final hurdle. The new spending will focus on projects like roads and bridges, as well as on expanding high-speed internet and green infrastructure projects. | 