Data Watch

October retail sales and food services growth was surprisingly strong. YoY growth hit 4.3%, helped by some upward revision to September’s figures. The more narrowly-focused “Retail Control” figure that goes into the wider Personal Consumption Expenditure calculation for GDP purposes was also quite strong. It would be good news if nominal spending were running above 4% YoY, but it is only two months of data for the “trend” and there were clearly some odd seasonal adjustments, as the non-seasonally adjusted YoY rate of growth was just 2.1% There may well be some elements of the 60% of consumer expenditure not… Read More

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US Labor Market unchangingly depressing

We have been closely watching the Fed’s own measure of the rate of change of the US labor market since the beginning of the year. Many times, Janet Yellen and her colleagues have told us that the labor market continues to improve but the evidence was that it was worsening – as judged by a measure the Fed themselves created. We suspect the measure was built to try and raise confidence that Fed policy was working to improve the employment situation at a time when the market had less confidence. When the measure started misbehaving the Fed just dropped all mention… Read More

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Knowing your AHE from your AWE, via AWH – PI better, PCE best

The October payrolls engendered the usual interest from inflation hawks keen to find evidence to support monetary tightening. At the end of the day it is the total nominal personal income growth trends that matters and it is very weak. The jobs data itself was not that interesting. The coming hyperinflation was spotted in the modest growth in Average Hourly Earnings (AHE) for All Employees as it soared YoY to a heady rate of 2.8%. Well, big deal. The more reliable, because much longer-term, Production and Nonsupervisory Employees Average Hourly Earnings growth rate showed no such increase and is firmly… Read More

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The labor market in recovery & depression

One should be by now bored to listen to things like “this was a solid employment report”, or “the labor market is strengthening”. But no matter, the Fed will honor its “pledge” to raise rates in December! What must be acknowledged is that the economy is in depression mode. In this context, data analysis and interpretation must change. “Positive” numbers in a depression have a different meaning from positive numbers in a recovery. The labor market is a case in point. It all becomes very clear when you compare the labor market during an economic recovery following a deep recession… Read More

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Some better surveys for October and for September were not confirmed in the latest PMI from the ISM for the huge non-manufacturing (services) sector. September had seen some very strong numbers both in confidence and employment intentions. In the latest, confidence dropped back a bit and employment intentions a lot. Other jobs news from the weekly jobless claims and the ADP Nonfarm Employment payrolls also showed less good trends. The ADP survey is a good predictor of private payrolls and was especially weak, especially for the small and mid-sized firms. Total payrolls released tomorrow should be better as the government payrolls… Read More

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Within the already announced 2016Q3 GDP numbers were the September Personal Income and Outlays data, the later also known as Personal Consumption Expenditure. Both Income and Expenditure growth flickered up YoY to 3.2% and 3.7% respectively. the MoM Income growth was disappointing as it consistently fails to close the gap on expenditure growth. Unless income picks up and closes that gap bulls clearly fear it will pull down expenditure, which is considered the most important driver of GDP growth. It is important to remember that these figures are for total income and expenditure, not per capita. Growth in the population… Read More

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GDP Report: Soybeans to the rescue?

From Bloomberg: U.S. economic growth picked up in the third quarter after an uninspiring first half of the year as a build in inventories and a soybean-related jump in exports helped cushion softer household spending. Which about tells you that the 2.9% annualized growth was nothing to call home about! The pictures tell a much soberer story. One that shows that recent trends remain weak, and worsening in the case of private real nonresidential investment. On the inflation front, data also released today show that alternative measures of inflation remain contained and comfortably below target. However, it appears that “the… Read More

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Several industry-side surveys this week have shown healthy trends in confidence, a turnaround from most of 3Q. This trend began with the first current month survey for the Philly Fed last week. Outlook was poor but current conditions were surprisingly strong. The two Markit flash PMIs for manufacturing and for services also showed sharp jumps in current conditions. Followed yesterday by the KC Fed surveys of manufacturing and general business in its regions. Most of these surveys had also shown promising upward movements in September. First estimates for 2016Q3 RGDP and NGDP out later today will be interesting but is… Read More

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A “lullaby” for the CPI

“weaker than expected as oil price rises keep headline CPI up, but Core lower spending switched to oil means less spending in other areas leading to lower prices in other core areas ’twas ever thus not enough money around” In her recent speech at the Boston Fed Conference, Yellen asks: My fourth question goes to the heart of monetary policy: What determines inflation? From my perspective, the standard framework for thinking about inflation dynamics used by central bank economists and others prior to the financial crisis remains conceptually useful today. A simple description of this framework might go something like this:… Read More

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Another incredibly anemic set of data for September industrial production. There appeared to have been some sort of bounce in September when viewing surveys, versus poor July and August figures, and that sort of came through – just a desperately weak rebound. Industrial production is still negative YoY and manufacturing production seemingly on a slowing trend. There were also negative revisions to earlier months. Capacity utilization also slipped back. The first survey for October manufacturing was not promising with the Empire State survey going negative again. A weak result was expected but it was worse. We do not expect any… Read More

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