Thursday, July 28, 2016

The Fed, Japan, and Durable Goods

Just some quick updates on news from yesterday.  If you haven't heard the FOMC decided to not raise rates. The Fed stated they've seen economic activity continue to expand at a moderate pace. I feel like that's been mentioned quite a bit the last year.  Also they noted "Near term risks to the economic outlook have diminished".  That's a pretty strong statement from them considering how they've worded things in the past.

Additionally we had Japans Prime Minister announce a more than 28 trillion yen ($265.30 billion) stimulus package. That is nearly 6 percent the size of Japan's economy. It will consist of 13 trillion yen in "fiscal measures," which likely includes spending by national and local governments, as well as loan program.

"We need to take steps to support domestic demand and put the economy on a firmer recovery path," Shinzo Abe said in a speech in southern Japan on Wednesday. "I want to use various measures to increase our escape velocity from deflation."

There are rumors the BOJ will announce more stimulus at their meeting Friday. I don't think this is the right path to reduce deflation the country has been experiencing for some time.  I think Japan is suffering from structural issues more than "fiscal" issues. If people don't feel confident in their government and personal financial outlook they will continue to save money, not spend it.

Also Durable Goods orders came in yesterday with a 4% drop on top of May's revised decline to 2.8% instead of 2.3%.  "Core" durable goods edged up 0.2%, but that's only the second increase this year. Automakers had another positive showing. Still the strong dollar and weaker international economies is taking it's toll.

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