The report revealed that in the second quarter of 2012 the U.S. economy slowed to an annualized 1.5 percent growth rate – down from a 2.0 percent pace in the previous quarter. However there were some positive indicators:
The housing sector continued to stabilize as a result of low interest rates and early recognition of troubled loans.
The manufacturing sector made gains through inventory building rather than user demand focusing on stock as current inventory levels are below historic norms.
Overall incomes in the U.S. rose 0.5 percent pushing the nation's savings rate to 4.4 percent as consumer spending stagnated.
The report also noted that the U.S. is not alone in its economic challenges with China India Brazil and Europe all facing issues. The U.S. Treasury's benchmark 10-year note closed July at an all-time low yield of 1.47 percent and sovereign bonds in perceived havens such as Germany Austria Finland and Japan all reported 10-year yields below 1.5 percent.
In the Eurozone – despite policymakers' best intentions – bond yields in Spain and Italy remain at crisis levels which could make a bailout necessary in both countries. Meanwhile China and India posted slowed growth results in the last quarter; Brazil also stalled in the face of its stronger currency.
In the energy and commodity sectors widespread declines caused profits to decrease more than 15 percent; basic materials companies witnessed a profit setback of nearly 19 percent. However the report noted that reported growth in the U.S. should pick up once lower energy and commodity input costs filter into third quarter income statements.
The S&P 500 benchmark index gained nearly 12 percent in 2012; however foreign markets have had less positive results. The MSCI EAFE index of advanced economy stocks gained approximately five percent this year while emerging market equities have seen growth of slightly more than six percent for the year.