Week In Review
Personal income rose 0.4% in May, while spending increased 0.2%.
Consumers spent less than expected in May. A tight job market and reduced taxes should help to fuel spending, but consumers may opt to save rather than spend, as uncertainty over trade and inflation increases economic uncertainty. While second quarter GDP is expected to be strong, reduced spending could hamper growth slightly.
Maine Governor Paul LePage refused to approve two general obligation municipal bond issues totaling $112 million. The issues went to auction on June 12 and Wells Fargo and Citigroup were the winning bidders. The bonds were to be delivered to buyers on June 26. LePage indicated that he needed more time to review the bond offering and it was reported that the governor was concerned about “excessive 11th hour legislative spending.”
Issuers may choose to reject all bids at auction, which causes the sale to not take place. However, in this case the governor refused to approve the sale of voter-approved bonds after the auction occurred and the winning bids were announced. Even though the governor technically had the authority to cancel the issue, many have voiced concerns about political reasons behind his actions. Maine may face increased borrowing costs in the future, as banks may be reluctant to bid on Maine bonds or ask for higher yields because of this week’s cancellation.