Economy Remains Sluggish, Despite Today's Data
-- August 15, 2003
The blackout that left millions without power is a reminder of just how fragile America's infrastructure is ... much like its economy. Everything looks fine until the lights go out!
Just take today's news that industrial production rose 0.5% and consumer prices gained 0.2% in July. Wall Street's cheerleaders were jumping for joy, but investors understood what the numbers meant: The economy is still weak. That's why stocks were little changed Friday.
Although industrial production increased in July, it was unchanged in June. On average, output increased only .025% in each of the past four months. That's hardly the sign of a booming recovery.
As for the price data, rising costs for gasoline and health care drove the consumer price index higher. But money spent on gasoline and doctors is money that consumers can't spend on anything else. And that means limited discretionary spending.
Furthermore, the scourge of deflation hasn't disappeared. Compared with 12 months ago, core prices, which exclude food and energy, were up 1.5%, the same as in June and April and the smallest annual rises since 1966. So the economy remains weak, and stocks will continue to suffer as a consequence.
Despite the happy talk on Wall Street, the US economy continues to sputter along with massive layoffs and lack of business spending. The big news is the ongoing carnage in the bond market -- and as bond prices fall, stocks should follow.
-- August 15, 2003
The blackout that left millions without power is a reminder of just how fragile America's infrastructure is ... much like its economy. Everything looks fine until the lights go out!
Just take today's news that industrial production rose 0.5% and consumer prices gained 0.2% in July. Wall Street's cheerleaders were jumping for joy, but investors understood what the numbers meant: The economy is still weak. That's why stocks were little changed Friday.
Although industrial production increased in July, it was unchanged in June. On average, output increased only .025% in each of the past four months. That's hardly the sign of a booming recovery.
As for the price data, rising costs for gasoline and health care drove the consumer price index higher. But money spent on gasoline and doctors is money that consumers can't spend on anything else. And that means limited discretionary spending.
Furthermore, the scourge of deflation hasn't disappeared. Compared with 12 months ago, core prices, which exclude food and energy, were up 1.5%, the same as in June and April and the smallest annual rises since 1966. So the economy remains weak, and stocks will continue to suffer as a consequence.
Despite the happy talk on Wall Street, the US economy continues to sputter along with massive layoffs and lack of business spending. The big news is the ongoing carnage in the bond market -- and as bond prices fall, stocks should follow.
