First, the Labor Department report Friday morning that the PPI — the producer price index, which measures inflation at the wholesale level — actually fell 0.4 percent in June, the biggest drop in PPI since a 0.5-percent fall in February 1999. That's a free pass for Greenspan to cut rates if he wants to.
Then the Commerce Department reported that retail sales continued to squeak up, rising 0.2 percent in June after May's upwardly revised 0.4 percent hike. That was a soft number, but look at what kept the overall number in positive territory — auto sales. Those about to tighten their belts do not buy new cars. And the University of Michigan's respected consumer sentiment index rose to 93.7 percent in July, according to a Reuters report, compared with a reading of 92.6 percent in June.
In a TIME.com Q&A, TIME senior economics reporter Bernie Baumohl takes us through the implications.
TIME.com: What's the upshot of Friday's numbers?
Bernie Baumohl: Thank God the consumer is there to save the economy. It's absolutely amazing that they continue to be so resilient. Retail sales growth is slowing down, but the fact that automobile purchases are so strong indicates that consumers have no real concerns about their future job security.
Shouldn't they be?
Hard to say. Thursday, we got the news that first-time unemployment claims hit their highest weekly level in nine years, and that was pretty scary. But the weekly numbers aren't too reliable, and until we see that four-week rolling average — or the monthly unemployment report — really spike, we can really start to assume that we've avoided a recession.
How's that?
The overall picture is that businesses need to start spending themselves — on restocking their inventories and on new capital investments to make their production more efficient — before the economy can really start growing again. Until then, the question has been whether consumers, who account for two-thirds of the GDP, will spend enough to last us until that happens.
The second quarter, just passed, may have been one in which we were close to or below zero growth. It now looks like the worst of it is over, because two big economic stimuli — Greenspan's series of rate cuts and the tax-rebate checks set to start arriving in August — are about to kick in. Consumers have always been nearly impossible to fathom, but at this point it's counterintuitive to think that consumer spending will now start to decrease with those two things on their way.
In other words, if the consumer collapse hasn't happened yet, it's not going to happen now.
It doesn't seem likely. The biggest impacter on consumer confidence in unemployment, and while it's likely to continue edging up, it seems relatively stable. People are getting laid off by the thousands, and the unemployment claims will certainly continue to rise, but the numbers indicate to me that the transition time between losing your job and finding a new one is relatively short.
What do these numbers say to the Fed?
Greenspan's first concern is still to do nothing to undermine consumer confidence — and he's apparently succeeded in doing that so far. The next thing is to stimulate business spending, which he hasn't been able to do, and which most people don't expect to happen at least until the fall. But with inflation so far off the radar screen, he'll be able to cut rates as much as he wants to try and bring businesses around as soon as possible.
So it does appear as if the second quarter will be the bottom of this slowdown. The crucial question is if consumers will continue to spend at least as much, if not more, as they have been for the first half of the year. They've been the heroes so far. And there's nothing in the numbers yet that says they won't continue to be.