If the central banks around the world want to bolster confidence, then I suggest they act sooner rather than later. Early corporate surveys here in the United States point to slower capital spending in the third quarter, and that’s bearish for job growth and ultimately for consumer spending, which accounts for two-thirds of GDP.
President Obama, Congress and the Fed can’t afford to run the risk of another slowdown that round-trips all of the stimulus spent to date. Treasury Secretary Timothy Geithner should be canvassing his banking peers around the globe to orchestrate a push to ease credit to markets. Otherwise, the economy will continue to contract.
Earnings season is upon us, and there are early indications that it’ll be mixed. While Oracle (NASDAQ:ORCL) and FedEx (NYSE:FDX) beat numbers and traded well, Bed Bath & Beyond (NASDAQ:BBBY) missed estimates and got slammed. The recovery remains spotty and uneven, with certain elements of IT spending — such as cloud computing and smartphone/tablet purchases — trending well. Some regions are enjoying an uptick in home purchasing, and new car sales are still quite robust. But there are signs that consumers in many regions remain highly stretched — and that’s an area that corporate spending can’t make up for.
Congress really needs to act to extend the year-end fiscal cliff risk profile that’s hampering decisions on spending at the corporate and consumer levels, and they need to do it as soon as possible. Once that happens, I believe there will be a period of relief that will translate into fresh hiring trends, expansion of corporate budgets and renewed consumer spending.
If those who call themselves legislators do nothing except bicker, then the next six months will be tough on all of us. Let’s hope rational and practical heads take the bipartisan road and lift the cloud of uncertainty from the current investing landscape.
It’s the least they could do.