CHICAGO--(BUSINESS WIRE)--Mesirow Financial’s Chief Economist poses the question about first quarter weakness in the economy: “Some… can be attributed to another bad winter and labor disputes. One has to ask how much we would be looking for excuses if the economy were on firmer footing.” Diane Swonk looks to consumers for a boost in the second quarter. “Consumer spending is expected to accelerate as the pent-up demand created by lousy winter weather is released and the benefits of lower prices at the gas pump are tapped.”
Recent strength in the U.S. dollar makes imported goods more affordable for consumers but it hits businesses trying to compete in international markets, as well as those companies selling into the U.S. market. “Nonfinancial companies derive an especially large share of their profits from operations abroad, while domestic manufacturers will have to compete with lower-priced imports.” Business will continue to benefit, however, from very low borrowing costs. Despite plans to gradually raise short-term interest rates, the Federal Reserve has repeatedly assured markets that rates will stay low for a long time.
The Fed may find that it is making a virtue out of necessity. Swonk warns that “liftoff” will be complicated since interest rates have been near zero for more than six years. “The fed funds market is a ghost of its former self, which means the Fed will have to rely on a different set of tools to raise short-term interest rates.” To learn more, read the latest issue of Themes on the Economy. Or, watch a video in which Diane Swonk explains more about strong dollar effects and monetary policy options. Archived issues can also be found at mesirowfinancial.com.
Mesirow Financial is a diversified financial services firm headquartered in Chicago. Founded in 1937, it is an independent, employee-owned firm with approximately 1,200 employees globally. With expertise in Investment Management, Global Markets, Insurance Services and Consulting, Mesirow Financial strives to meet the financial needs of institutions, public sector entities, corporations and individuals. For more information about Mesirow Financial, visit its website at mesirowfinancial.com.