What's going on?

There have been a few more signs in recent days that US economic growth is softening more than expected � and that�s often bad news for stocks.

What does this mean?

On Monday, a report showed that orders for �durable goods,� which are products typically meant to last for more than three years, fell significantly more in May than expected. That�s sometimes a sign that businesses are pulling back on �investing�, e.g. buying new equipment. On Friday, an influential survey suggested that business activity has grown at its slowest pace in three months during June. There was, however, some good news: �new orders� from customers increased, which means businesses are seeing signs that activity will increase faster in future months. All in all, though, the current data suggests that the US economy is probably growing more slowly this year, so far, than it has in recent years.

Why should I care?

The bigger picture: The US Federal Reserve (�the Fed�) may be increasing interest rates while economic growth slows � which is a dangerous combination.

Higher interest rates make growth harder to achieve because it becomes more expensive for people and companies to borrow, and thus spend, money (among other reasons). As such, the Fed usually tries to only take action to increase interest rates when economic growth is increasing. The Fed has said it intends to press ahead with actions to keep pushing up interest rates; investors will be watching closely to see if it sticks to those plans.


For markets: The global economy may be providing less of a tailwind to stocks.

China, which is the world�s second biggest economy, appears to be experiencing slower economic growth relative to last year. The US may be in the same boat and Britain is performing notably worse. The bright spot is the eurozone, which continues to post encouraging data, but the overall global picture is weaker than many investors had anticipated. That should, in theory, feed through to lower profits for companies. However, with stock prices still near record highs, investors don�t seem too worried!