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Economic commentary

Economic commentary

A big, if mixed, week for the economy and markets

As expected, the Fed cut the target range for the federal funds rate. But there were lots of unexpected crosscurrents. First, the Fed also stopped its quantitative tightening (QT) program two months early. Second, the Fed only cut by 25 bps, not the 50 that many market participants hoped for. And third, Chair Powell noted that this was more of a mid-cycle insurance cut rather than the start of an easing cycle as might occur at the start of an economic downturn. 

Economic commentary

Growth slows back to trend

The economy slowed from the first quarter’s rapid pace with annualized real GDP growth of 2.1 percent for the second quarter. Consumer and government expenditures both grew strongly — offsetting a small decline in business fixed investment, a weakening for net exports, and a substantial slowdown in inventory accumulation. Year-over-year growth in real GDP also downshifted to 2.3 percent, the slowest pace in nine quarters but right about the average for this record-long expansion.  

Economic commentary

Consumers continue to spend

Retail spending was better than expected for June with total retail sales up by 0.4 percent. Core retail sales (excluding autos, building supplies and gasoline) grew at an even faster pace – with a 0.7 percent gain as strength across several categories offset a drop at gasoline stations as prices dropped. The 12-month growth rate in core retail sales accelerated to 4.5 percent for June, far surpassing the meager pace of inflation.  

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