June 28, 2013

Fed Trying to Talk Rates Back down.

June 28, 2013

Fed Trying to Talk Rates Back down.

Chicago PMI  (June 2013)

– Business Barometer Index 51.6.  Previous was 58.7.

Consumer Sentiment (June 2013)

– Sentiment Index  Previous was 82.7.

This is the University of Michigan survey index.  It is supposed to measure consumers’ predisposition to spend.

All of the data on Consumer Spending is  important because Consumer Spending is 71% of GDP.  What we have this week is mixed data.  The GDP Report showed Year/year per capital disposable income down in the 1stQ2013 at an annualized rate of -9.21%.  Yesterday we saw Personal Income for May up 2.8% Year/Year.  Today we see Consumers saying they are more willing to spend.

The question of interest is this:  are consumers spending their income or spending their savings? Take a look at this table from the St. Louis Federal Reserve of historical Savings Rate.

If Consumer Spending is up because consumers are spending their savings then the increase in consumer spending noted for May cannot continue much longer.

It is not a fundamental but we have seen in the past two days Fed members and former Fed members trying to undo the damage to rates suffered by last week’s Fed statements and answers from Bernanke about QE in the near future.  Trying to  influence markets with PR is not going to work.