The economic news these days is anything but clear and informative. It is mainly confusing and contradictory. The latest information on consumer confidence is both positive and negative with the Conference Board reporting the best numbers in almost 18 years. Meanwhile the University of Michigan consumer sentiment index fell this month to the lowest level in almost a year amid less favorable views on purchasing big-ticket items and persistent concerns about trade tensions. See “Housing and consumer confidence both weakening”, August 23, 2018. In addition, Fed Chairman Jerome Powell at the Jackson Hole summit of central bankers noted that the statistics are contradictory for many areas. Especially when it comes to employment there is much disagreement about the US having reached full employment.
If we have reached full employment, as many economists say we have, it is reasonable to assume that we will get four to five rate hikes. But we may not have reached full employment and the consumer confidence numbers from U. Michigan are more believable than those from the Conference Board. That means the rate hikes advertised by the Fed chair could be the wrong medicine for our economy at this point in time.
In addition, the barrage of odd comments by President Trump on the economy and on international political developments are not helping provide a clear vision about the future. Meanwhile, the US stock market has recovered from its earlier in the year declines and has recently been making new highs. This implies that the outlook for the economy remains rosy.
The upshot of all this is that confusion is the driving force at the moment. When things get back to normal what could happen is anybody’s guess.