Consumer sentiment ends June to near six-year high

Data indications are as per analysts expectations. As one of the Fed officials say , Fed decisions will be data driven. Does this mean , the Fed will taper sooner than expected?

It is one hell of a robust economy that depends on the sentiments of people who willingly define themselves as consumer. “So what do you do?” “Me, why I am a consumer” “Yes, I buy useless items when my sentiments are doing well.”

If one reads between the lines, there is a clear signal from the Fed about tapering in as early as september. There will be some short term pain, but the long term gain will be there as the Fed starts unwinding the QE programs.

“as optimism among higher-income families rose to its strongest level in six years”

Isn’t that special…

The Institute for Supply Management-Chicago said its index on Midwest business activity posted a steeper-than-expected drop in June to 51.6. A reading below 50 points suggests business contraction.

“It’s not firmly in expansion territory where businesses are ready to hire and invest,” said Tim Quinlan, an economist with Wells Fargo Securities in Charlotte, North Carolina.

The Institute for Supply Management-Chicago said its index on Midwest business activity posted a steeper-than-expected drop in June to 51.6. A reading below 50 points suggests business contraction.

“It’s not firmly in expansion territory where businesses are ready to hire and invest,” said Tim Quinlan, an economist with Wells Fargo Securities in Charlotte, North Carolina.

Household expenditures, however, have remained sluggish despite improving optimism. Consumer spending grew at an annualized 2.6 percent in first quarter, faster than the 1.8 percent pace in the last three months of 2012 but slower than an earlier government estimate of 3.4 percent.

This is too easy

This is yet another clear signal to the market, that the Fed is considering QE tapering as early as September. This means there will be volatility and there could be corrections , as the unwinding of QE works through its way. But, this unwind will be uncharted territory. Therefore, increased volatility and downside risks remain.