The Monday Moneybeat

MARY REICHARD, HOST: Today is Monday, July 2nd. Thank you for turning to WORLD Radio to help start your day. Good morning. I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher.

Coming next on The World and Everything in It, the Monday Moneybeat.

Americans spent more money in May, just not at the rate of increase in the previous two months. On Friday, the government reported consumer spending up just two-tenths of a percent. That particular economic indicator matters because consumer spending accounts for 70 percent of economic activity in this country.

The disappointing report from the Commerce Department made it more likely second-quarter gross domestic product would be a bit less strong.

President Trump has said his low-tax, low-regulation economic policy should produce annual GDP growth of about 4 percent. First quarter GDP stands at 2.2 percent. The forecasting firm Macroeconomic Advisors had been projecting a growth rate in the second quarter of 5.4 percent. With the lower consumer-spending figure, the firm now projects 4.8 percent.

By the way, because Americans didn’t spend so much, their savings rate grew last month, because their wages outpaced their spending.

One other key economic indicator is inflation, and that went up in May 0.2 percent. That put inflation over the past 12 months at 2.3 percent. It is the fastest inflationary pace since 2012. And that’s important because the Federal Reserve typically tries to keep inflation under 2 percent. When it crosses that mark, the central bank wants to apply the brakes to cool the economy. The fed does that by increasing interest rates. It’s pushed up interest rates twice already this year and it’s expected to do that twice more before the end of the year.

REICHARD: We reported on the Supreme Court’s ruling that allows states now to tax internet sales. But Republican lawmakers and governors around the country are talking about cutting taxes elsewhere, rather than spend the windfall.

In Wisconsin, Governor Scott Walker has suggested the extra revenue could be used to expand tax breaks for seniors or households with children.

In Nebraska, the governor there, Pete Ricketts, wants to put it toward property tax relief.

Some Kansas lawmakers are considering a reduction in the food sales tax. The Tennessee House speaker wants to lower the state’s 7 percent sales tax rate; and a Missouri lawmaker plans to sponsor an individual income tax reduction.

State and local governments stand to gain $8 billion-to- $13 billion annually by collecting taxes from all remote sellers.

EICHER: On Wall Street, Friday was the last trading day of the first half of the year. With the books closed on the second quarter, we can say it was a volatile quarter for stocks.

Here’s an example:

Last year, 2017, the stock market only had eight big moves in more than 200 trading days. Analysts define a “big move” as a trading day in which the Standard & Poor’s 500 stock index rises or falls 1 percent or more. So eight big moves all of last year.

By contrast, this year it’s already experienced 36 big moves. Eight versus 36. That’s more than four times the volatility in half the time.

The market has been buoyed by tax cuts and very strong corporate profits, but of late, worries about inflation and now a possible trade war have had an effect on stock prices.

For the week, all the major indexes lost value, and so here’s where things stand after two full trading quarters:

The S&P 500 is up 1.7 percent.

The Dow is down by about the same.

Tech stocks and smaller company stocks fared much better: The Nasdaq is up 8.8 percent so far on the year, and the Russell 2000 stock index has gained 7 percent.

And that’s this week’s Monday Moneybeat.

(AP Photo/Mark Lennihan, File) In this May 10, 2018, file photo, stock screens are shown at the New York Stock Exchange. 

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