Data Watch

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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The early indications for September spending from the retail sales figures were OK but couldn’t offset not very good July and August data points. Nominal growth YoY is thus running at just 2.7%, a rate that has been observed since early 2015, which is just slightly more than half the 5.1% average YoY growth observed from 2010 to 2014. The “core retail control” figure that excludes gasoline sales was much weaker than expected. Gasoline prices in the US had risen last month following oil price increases, forcing consumers to spend more there and less elsewhere. Adjusted for prices, real consumer… Read More

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The Change in Labor Market Conditions Index points to a Weakening (not strengthening) Labor Market

For a long time, the FOMC has stated that the labor market is strengthening. As Janet Yellen put it in August 2014 at the opening remarks of the Jackson Hole Conference the theme of which was “Labor Market Dynamics and Monetary Policy”: One convenient way to summarize the information contained in a large number of indicators is through the use of so-called factor models. Following this methodology, Federal Reserve Board staff developed a labor market conditions index from 19 labor market indicators, including four I just discussed. This broadly based metric supports the conclusion that the labor market has improved… Read More

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Labor Market: Flat as Kansas

However, since at least January 2015 the FOMC meme after each meeting has been: From January 2015 to September 2015: Inflation will rise to 2% as the labor market improves further. From December 2015 to the present: Inflation will rise to 2% as the labor market strengthens further “Strengthens further” must mean “improves further” on steroids. But, as the charts show, for the past 12 months, nothing is changing, let alone improving or strengthening. Small fluctuations in the monthly unemployment rate, for example, derive from small disturbances in the LFPR and/or the Employment Population Ratio. Hours has dropped a tad… Read More

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The September ISM’s Non-Manufacturing PMI released today was robust. Perhaps the strange result was the very weak figures reported for August. September was merely back to the positive trend in this series that had been recorded for June and July. May, however, was also quite poor. The Non-Manufacturing ISM seems to have become a very volatile series, so perhaps not that reliable. It is a very difficult sector to survey because it is so large, with lots of high value added businesses like professional services, but also with lots of low value added ones. Are the surveys really getting to the right… Read More

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