May 2017

Consumer expenditures recoil

Despite “uplifting” comments: Americans ramped up their spending in April at the fastest pace in four months, offering fresh evidence the U.S. economy is rebounding this spring after a lackluster winter. The truth is less cheerful, with year-on-year consumer spending growth following confidence down! And how did markets react to the inflation, confidence and comsumer

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2%? Maybe in 2025!

As someone said: “Inflation is not cooperating with the Fed!” Although San Francisco Fed Williams is sanguine: When you look at how the data relate to those two big goals I mentioned—maximum employment and price stability—they paint a very clear picture: The U.S. economy has fully recovered from the global financial crisis and the ensuing

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Unpleasant rumblings in EUR land

As some debate raged in the corridors of the ECB about both Draghi’s successor and over when and how to end the QE for the EUR, the common currency remained strong, helping keep the USD weak. Draghi has been such a relative force for good at the ECB, boldly implementing QE and other measures to
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Manufacturing going to pot

The Core Durable Goods Orders data for April released today showed a second month of MoM fall. The data for durable goods is echoing that seen in the surveys of manufacturing for both April and May.  The outlier appears to be the Industrial and Manufacturing Output figures for April, which showed surprising monthly strength. The

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Yes, interest rates should be banned from monetary policy discussions

At the Mercatus Center, Thomas Raffinot has an important working paper: According to the conventional view, low interest rates are associated with “loose” monetary policy, leading to higher inflation, whereas high interest rates are associated with “tight” monetary policy, leading to lower inflation. Interest rates, however, are unreliable indicators of monetary policy: low interest rates
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Minutes from FOMC Meetings are a fantasy!

From Participants’ Views on Current Conditions and the Economic Outlook: Although the incoming data showed that aggregate spending in the first quarter had been weaker than participants had expected, they viewed the slowing as likely to be transitory. They continued to expect that, with further gradual adjustments in the stance of monetary policy, economic activity

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Japan has put together a string of five straight quarters of real growth, along with declining unemployment and minute amounts of inflation. Some have recently termed Abenomics “a big success.” If so, then worth noting is that Abenomics’ “three-legged stool” of fiscal reform, less regulation and expansive monetary policy has so far been carried out
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NGDP Outlook-May 21, 2017

The NGDP outlook has rebounded a bit from a low point for the current Quarter-2 of 2018 forecast that was seen in early May. Notably, the rebound preceded the recent volatility in US Equities. Recapping the recent moves in US equities: the S&P 500 tanked on May 17, falling about 1.7 percentage points. The drop

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In trying to “square the circle”, the Fed is courting disaster!

Tim Duy summarizes the problem as the Fed sees it: The Federal Reserve can’t catch a break on the inflation numbers, which are simply not helping in its drive to normalize monetary policy. Monetary policy makers have three possible responses to the weak inflation data. First, they can define down the extent of an acceptable

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