"While expectations have fluctuated over recent months, current conditions have continued to trend upward and the Present Situation Index is now at its highest level in almost six years"
- Lynn Franco, director of Economic Indicators at the CB
Is it just severe weather conditions that weighed on the U.S. economy in the last months or it is a more complicated issue that should not be shrugged off by the Fed? On Tuesday the Conference Board said a gauge of consumer mood dropped to 78.1 this month from a downwardly revised 79.4 a month earlier and falling short of analysts' expectations for a 80.0 reading. The company explains such a disappointing figure by a steep decline in the expectations index that plunged to 75.7 over the period compared with 80.8 in January. The data means that the economy has improved in the recent months, however, households are still concerned about the future, and do not expect a rapid growth. Consumer spending is the linchpin of the world's largest economy, however, Americans have not been increasing their spending by much during this year's harsh winter. Therefore, retail sales surprised markets to the downside as well. As consumer spending represents the biggest part of the economy, Friday's GDP report can show economy has lost some of the momentum.
Later this week the Fed Chairman Janet Yellen will complete her snow-interrupted inaugural testimony to the Congress. It seems highly possible that Yellen will try to elicit her personal views about the strength of domestic economy, the reasons for inability to create jobs as well as shed light on how the central bank's tapering will affect the domestic and global economies.
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