Mixed economic data raises concerns

Several indicators of economic strength in the United States missed economists’ expectations in the past week, and experts are blaming uncertainty over whether the Federal Reserve will announce cutbacks in its bond buyback program during planned meetings next Tuesday and Wednesday -- and if so, by how much.

The bond buyback program was created after the recession of 2008-09, and the Fed currently buys $85 billion in bonds from private institutions each month in order to increase the economic base of the country. But Fed Chairman Ben Bernanke announced in June that the program would eventually be reduced as the economy improves according to big-picture figures. Even though the reduction will likely be small, it has caused some economists to worry that the real recovery from the recession will remain slow and painful for most Americans.

On Friday,Thomson Reuters and the University of Michigan said their index of consumer sentiment fell 5.3 points to 76.8 in early September, the lowest it has been since April. The survey measures how people feel about the economy, and is meant to predict how much they will spend in the coming months.

A separate survey released Friday by the U.S. Commerce Department showed that consumer spending on essential goods was up just 0.2 percent in August -- far below many analysts’ expectations, and a steep drop from 0.5 percent in July.

Clothing store receipts dropped by the most in more than a year, reflecting a slow start to back-to-school sales and sounding a cautionary note ahead of the holiday shopping season. Companies like Walmart and Macy’s have seen disappointing revenues over the past few months as well.

The figures highlight concerns about overall economic health, despite seemingly positive economic indicators such as the most recent unemployment claim numbers.  

Claims for federal unemployment assistance fell last month, but unemployment remains painfully high at 7.3 percent. That fact, coupled with the mixed consumer data, may point to an unfortunate reason for fewer claims: not more people finding jobs, but more people giving up on looking for work.

"It's hard to believe that claims can keep declining indefinitely without a commensurate pickup in job growth," said Dan Greenhaus, chief global strategist at BTIG, a global hedge fund and trading firm. "The ongoing drop in ... claims has not shown its normal relationship to job growth."

But even with the disappointing data, and the uncertainty caused by the Fed’s announcement in June, most experts believe Bernanke will announce a reduction of the buyback program next week. It remains to be seen what effect that will have.

Al Jazeera and wire services