As I have been suggesting (ad nauseum), there are structural adjustments taking place at the consumer level in the US economy that have yet to become part of the conversation.
Traditionally, the US Federal Reserve's mandate tends to be the main focus: "maximum employment and price stability" and the current conversation surrounding the next move in interest rates (to the upside) is focused on these 2 key issues.
However, there are many moving parts to the US economy outside of those 2 issues that also need to be respected.
The consumer is 2/3 of the US economy and while they are getting more and more employed, they are earning less and their spending habits are shifting:
I have talked a great deal about the aging Baby Boom cohort focusing more on surviving retirement without running out of money and the (now largest) Millennial cohort with less money to spend and considerably different consumption priorities.
Next Monday (August 3) we shall see key Q3 data on July Personal Income and Consumption that will give some further insight into the US economy's progress and the consumer that drives 2/3 of it.
However, initial Q3 data are not impressive:
Consumer confidence appears to have peaked and retail sales are slowing.
Automobile sales lead consumer spending higher in Q2 (+2.9%), spurred by cheap financing (low interest rates), but Q2 GDP still fell short of expectations:
If the US Fed were to raise rates it might choke off an economy that is growing, but at a significantly slower pace (at the moment) than is expected.
A slower growing US economy may hamper economic growth on a global scale as most other economies, outside of the UK, are still struggling.
In other words, the Fed's decision will have a global impact and they are certainly aware of this:
"When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist