Down, Sure, But Closer to a Bottom

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

By and large, the recent economic data have been consistent with a slower pace of economic growth – not a sharp decline in overall economic activity. For the press, that’s not news. “Recession” is what sells. Unfortunately, fears of a broader downturn can be self-fulfilling. Businesses make decisions on where they expect the economy to be. There is already evidence of reduced hiring (not job losses) and curtailed capital spending plans. Yet, it’s not as bad as the media would have it. Sure, the stock market is down sharply in early 2008 – but doesn’t than mean we’re closer to a bottom?

...

Chairman Bernanke again hinted at upcoming aggressive action from the Fed. He recognizes that overall inflation was high last year and that core inflation has picked up recently. However, the Fed expects a moderation in overall and core inflation this year, as food and energy prices moderate, inflation expectations remain in check, and resource utilization rates fall.

This being an election year, politicians are falling all over themselves to propose fiscal stimulus plans. Such efforts are unlikely to boost growth by much. In this kind of environment, the Federal Reserve should do the heavy lifting (leave fiscal policy for the long term). However, should any of these plans pass quickly, the financial markets might take some encouragement.