FW: Bridgewater Daily Observations - " The US economy has been growing at a moderate pace in recent months, and roughly what we'd expect growth to average going forward in the absence of a meaningful change in monetary or fiscal policy..."

From: Bridgewater Daily Observations [mailto:Bridgewater_Daily_Observations@bwater.com]
Sent: Wednesday, August 15, 2012 8:16 AM
Subject: Bridgewater Daily Observations - " The US economy has been growing at a moderate pace in recent months, and roughly what we'd expect growth to average going forward in the absence of a meaningful change in monetary or fiscal policy..."

 

The US economy has been growing at a moderate pace in recent months, and roughly what we’d expect growth to average going forward in the absence of a meaningful change in monetary or fiscal policy.  Over time, without a material increase in credit growth (which due to the ongoing deleveraging we think is unlikely), we’d expect spending to roughly track mediocre income growth rates.  Household spending, however, has recently been somewhat weaker than incomes and the rest of the US economy.  We think this is more likely to be a wiggle than a meaningful, sustained slowdown in spending that would flow through to weaker production and employment.  The sluggish spending occurred at a time when economic conditions facing consumers were deteriorating and prior stimulation was fading.  But more recently, conditions facing households have improved somewhat; equity prices have been rising, home prices stopped declining, and interest rates have fallen.  Tuesday’s strong retail sales report for July was one data point consistent with an improvement in household demand.  Other indications of demand conditions, however, such as consumer confidence and business expectations for sales, have not materially improved in the last month or two.