The Fed awarded another 50-basis point cut in interest rates, despite resilience in the economy. The Federal Reserve remains very concerned about corporate earnings weakness and the subsequent sharp reduction in spending. Industrial production declined further in April and capacity utilization dropped to its lowest level since 1991. The good news is that inventories are shrinking very rapidly.
Consumers continue to spend, as indicated by a widening trade gap.
Inflation at the consumer level remains very benign. The Nasdaq remains stuck below 2,200. The Federal Reserve cut short-term interest rates by half a point, and most importantly, left the door open for further cuts in the future. Reduced capital spending is one of the dominant drags on the economy right now. This doesn t bode well for productivity in the short term.