Our short national nightmare may finally be over.
The first quarter is coming to a close, and it wasn’t very good. The government shutdown, inclement weather and worries about the stock market weighed on the economy. That was something investors got a reminder of Friday when the Commerce Department reported weak consumer-spending figures for January. Economists at Goldman Sachs (GS) now estimate gross domestic product is on track to grow at a rate of just 0.8% in the quarter.
But moods have brightened lately. Also on Friday, the University of Michigan reported that its index of consumer sentiment rose to 98.4 this month, up from a preliminary March reading of 97.8 and well above the three-year low of 91.2 it logged in January. This is an early indication that the economy’s first-quarter soft patch was, in fact, a patch, and that the second quarter will look a whole lot better.
Even so, it would likely take time, and a run of good data, before policy makers at the Federal Reserve consider moving off their current, dovish track. It probably wouldn’t be until June before economists could say with real confidence that the economy has bounced back. And with GDP zigging and zagging from the first to second quarters, it could take even longer to get a sense of the underlying trend. So even if the economy does well, the Fed might not make any noise until some time in the summer.
Renewed strength in the economy, plus having the Fed off their backs is a very nice setup for investors. Eventually the central bank could take the punchbowl away, but for now the drinks are on the house.
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