The Fed eased approximately five months into the current bear market. The reduction of interest rates generated a strong housing market, strong auto sales and strong consumer spending. The economic recovery is being led by the consumer, not business. In fact, we may be experiencing the first post-war slowdown that is more directly attributable to the business rather than household sector. Consumer spending on housing, cars and other durable goods continues to be strong.
Home ownership is at an all time high.
The home is still consumers' principal asset, and with housing prices appreciating in most geographic areas, the negative wealth effect caused by the stock market correction has not materialized. The Commerce Department reported that with the exception of inventories, almost all components of GDP matched or beat expectations, and overall growth was double the consensus forecast. It is important to note, however, that all GDP-related figures are seasonally adjusted annual rates, and some components could be downwardly revised as projections for March are replaced with actual results. Business managers, on the other hand, are standing on the sidelines and are laying off substantial numbers of workers, which will eventually have a negative impact on consumer spending. The Labor Department recently reported that weekly demand for jobless benefits has hit a five-year high.