If the economy is slowing, as many of the experts speculate, how do they explain a near-record level of consumer confidence? When asked about the future, Americans describe it as filled with promise, a new century of plentiful jobs and rapidly growing incomes. Such prospects hardly match up with the Federal Reserve’s determination to shift the economy into a lower gear. Economist Lynn Reaser expects Tuesday’s report on consumer attitudes for June to show a drop in the Conference Board’s index, to about 138 from the stratospheric 144.4 a month earlier. But overall, she said confidence remains extremely solid because job opportunities are ample. “Consumers are starting to sense that the economy has peaked, and that it is beginning to slow,” said Reaser, of Bank of America’s Asset Management Group in St. Louis. “The big negative right now is the jump in gasoline prices, which is making consumers nervous,” she said. “It is making them reluctant to buy big sport-utility vehicles and some other items. They are displaying a bit more caution.”
FEDERAL RESERVE
JUST A PAUSE
The Fed’s sharp fangs probably won’t be evident Tuesday and Wednesday, when its Open Market Committee meets to discuss interest rates. But economist Tim O’Neill thinks the Fed isn’t through tightening credit. By early next year, short-term rates will be a full point above today’s level of 6.5 percent, said O’Neill, of Chicago’s Harris Bank and its parent, Bank of Montreal. “There has been a change from a month ago, when everyone thought the Fed would immediately raise rates,” he said. “We have seen a string of softer economic data. But while this is a pause, the race isn’t over. The Fed still has a long way to go. Policymakers will raise rates by another half-point when they meet in August.” In O’Neill’s view, the economy’s underlying strength is such that still another rate increase may be needed in October, right before the national elections.
HOUSING
A KEY REPORT
A long list of reports due out includes May existing-home sales Monday, the month’s orders for durable goods Wednesday, May new-home sales Thursday along with a final revision of first-quarter gross domestic product, and May personal income and spending Friday. Of the group, keep an eye on the housing market; while it has cooled, and building permits are off sharply, analysts are unsure whether the real estate slowdown is enough to keep the Fed from driving another nail into the industry. In many parts of the country, home prices have mushroomed and rents continue to soar.
WALL STREET
THE 1ST-HALF BLUES
For the stock market, the end of this week marks the conclusion of the year’s first half. For investors, returns in 2000 have been less than stellar; blue-chips are barely ahead of where they stood a year ago. The Dow Jones industrial average, which closed Friday at 10,404.75, is down about 10 percent, or 1,092.37 points, since the first of the year. It is 11 percent below its high, set Jan. 14 at 11,722.98. Standard & Poor’s 500-stock index is down about 2 percent from where it began 2000, while the Nasdaq composite index is down 5 percent. The Nasdaq is 24 percent below its March 10 record close, 5048.62.
