New economic data was released Thursday and we hate to be the bearer of bad news, but the data showed further market weakness. An analysis of earnings conference calls also released by Goldman Sachs pointed to the economic uncertainty coming out of Washington, D.C. as a factor in the economic squishiness. According to CNBC, Goldman highlighted the concerns of various executives in its analysis:
UPS: “In the US, uncertainty stemming from this year’s elections and the looming fiscal cliff constrains the ability of businesses to make important decisions, such as: hiring new employees, making capital investments, and restocking inventories. This will further restrict economic growth.”
BlackRock: “So for the remainder of 2012, unfortunately all eyes are still going to be on politics and the economy. We have elections in November followed by the impending fiscal cliff and the sequester. This will likely create additional uncertainty and lead to more soft business sentiment and probably a reduction in consumer spending.”
Citigroup: “The fiscal cliff remains a deeply worrisome factor, especially for 2013 EPS and markets. The potential for a combined near 4 percent fiscal drag from higher taxes and spending cuts at the beginning of 2013 if no arrangement can be made (most likely after the November elections) is appropriately being viewed as a major source of economic and equity market discord.”
Supporting the concerns, the Commerce Department announced that housing starts dropped 1.1 percent last month. While the number is constantly revised by the Administration, this number was below the number forecast by experts in the Reuters poll. Even worse, the government also revised estimates for the past few months, with June and May both revised downward. Unfortunately, housing construction was thought to have been a bright spot in our economic relapse. The weekly jobless claims also inched up, with 2,000 more worker filing for new jobless claims; however, this was in line with economists’ expectations.
But, the private sector is doing fine, right Mr. President?
Photo credit: The Colorado Observer