Consumer debt moderated somewhat in the last few months resulting in various retail chains announcing softer sales and leading some forecasters to announce the economy has entered a slowing phase. It appears consumers are confident enough about the near future that any significant slowing in current spending patterns should not develop in the upcoming quarter. The purchasing managers index has moved below its growth indicator reflecting some contractions in the economy. Over the last three months, the leading indicators have also been modestly negative. It would appear some slowdown is taking place especially after six interest rate increases by the Federal Reserve Board.
Productivity remains a bright spot as prior equipment spending is now bearing fruit.
It is expected any slowdown should be moderate as the consumer remains upbeat and the fear of a hard landing is currently overstated. As the election process unwinds, numerous trial balloons will be launched by each party keeping the equity volatility high well into the fourth quarter. Any moderation in economic growth will impact top line revenue growth which could shrink margins leaving corporate earnings growth below expectations. Multinational corporations are also contending with a strong dollar weakening the repatriation of foreign earnings back into the United States. This earning challenge should continue for the next few quarters as past growth had been quite strong.