Data Watch

We have already shown the increasing unreliability of the various industry confidence surveys like the PMI from the ISM and from Markit for manufacturing and services. They are poor at predicting levels of activity and thus levels of GDP. They do appear to have some use at predicting turning points, even if at low levels of growth. So,

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The first regional Fed surveys for manufacturing in the current month both showed very strong surges in activity. The Empire State Manufacturing hit a two and a half-year high with a reading of 18.7, up from 7 in January and 0 to negative for the last two years. This is near the level it reaches

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Aggregate Nominal Spending and the Consumer

From the news: Retail sales rose at a healthy pace in January, a sign that firming wage gains and solid consumer sentiment could be set to boost overall economic growth in 2017. “The upshot is that the improvement in consumer confidence since President Donald Trump’s election victory now appears to be feeding through into stronger gains

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The “good” and the “bad” inflation indicators

From the news: A jump in gasoline prices helped push inflation to its strongest monthly gain in almost four years in January, a sign of steadily rising price pressures that may support additional moves by the Federal Reserve to raise interest rates this year. The Fed would be doing a grave mistake if it used

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Industrial Production indicates that the “recovery” ended in 2014

It´s well known that manufacturing makes up less than 20% of the economy while the service sector, which gets far less attention, contributes much more to the economic pie. However, in contrast to services, which grows steadily irrespective of ‘wind strength’, manufacturing is highly sensitive to changes in interest rates and demand. That´s the reason

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A marginally better report from the NFIB in January. We know all about the surge in optimism amongst businesses and consumers. Until recently, this had not translated into better actual growth. The January NFIB Small Business Economic Trends showed optimism sustaining the post-Trump surge. They did remain cautious on actual sales, but it was an improvement:

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Change in Labor Market Conditions Indicator: Still mediocre

During the spring of 2016, the economy stopped worsening. That trend started in mid-2014, when the Fed began the “tightening talk”. As expectations deteriorated strongly in early 2016, the Fed “eased-up”. That pattern is clear in all production/output indicators and is present in the CLMCI. It´s not a coincidence that conditions in the labor market

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Last month the payroll data for December caused a storm of excitement about rapidly accelerating wage growth. That was true even for some Market Monetarists. The headline Average Hourly Earnings for All Private Employees hit 2.9% back then. We were skeptical as the AHE figure ignores Average Weekly Hours, which has been weak. Consequently, Average Weekly Earnings

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The ISM manufacturing PMI wrung a bit more positive in January. In this move, it followed the other surveys from the regional Feds and the Markit Manufacturing PMI.  There is clearly an encouraging trend emerging in these surveys. That said we are still skeptical about the surveys impact on actual manufacturing production given recent divergent history.

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Waning Confidence and Contained Labor Costs?

As the chart indicates, it seems that the post-election “consumer confidence rally” is waning. That´s also reflected in stocks, bonds and the dollar. In other words, be careful betting on the “reflation trade”. During the first leg of the two-day FOMC Meeting, the release of the Employment Cost Index, which rose 2.2% year-on-year in the

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