Data Watch

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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Some interpretations of the ISM Manufacturing PMI claimed to see a recovery that might impact the FOMC’s decision in November or December. Markets did not agree, barely moving on the data release. Markets are always right and it is not difficult to see why with this release. A healthy manufacturing sector expands at around 55 on the ISM scale. In August the reading of 49.5 represented contraction, like that seen over the Nov 15 – Feb 16 four-month period. The recovery in September was to a paltry 51.5. If anything, more of a recovery would have been expected after a particularly poor August for… Read More

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Personal Income and Outlays confirm poor August, poor LT trends

The data releases came at or below expectations. The economy is neither hot nor cold, just tepid. The charts indicate that the trends for the past two years have weakened. That´s not surprising given the Fed´s “actions” over this period, when all the talk has been about “normalizing” policy, something for which, according to Yellen, there´s “no fixed time-table”. The “guessing-game” the Fed is playing is just not conducive to an improvement in economic outcomes. August was confirmed a poor month for GDP. This is not really news now that current month, September, surveys have shown better outcomes than expected.… Read More

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GDP Report – Second Revision

RGDP QoQ annualized growth was revised up to 1.4% from 1.1% in the first revision. Here we read: Thursday’s report showed a measure of business investment improved rather than declined, accounting for most of the upward revision. On a YoY basis the revision was from 1.2% to just 1.3%. These annualized QoQ figures make for dramatic headlines, multiplying actual % change by four,  but are grossly exaggerate of reality. However, no matter how you slice it, it´s a dreary economic performance. The charts give an idea. On the LHS, we get an idea of the depth of the recession, measured… Read More

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After a good result in August, the September survey was even better, and August was revised up. The level of 104.1 is the highest since the recession ended, beating the previous post-recession peak set in January 2015. It was driven by growing confidence in the jobs market even if income prospects and business conditions were more balanced in their outlook. This picture fits with the sluggish growth in the economy overall, but no pressure on the labor market, either on the downside to cut jobs or on the upside to raise wages. It´s as if the economy has shown the… Read More

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While consumer confidence shows strength, the output side of the economy had been reporting weak trends. Manufacturing has been poor for a long while, as seen in the Industrial Production numbers and surveys like Markit’s for manufacturing, which was out last week and showed weak results for September. Worrying was the fact that the far bigger services sector was also reporting poor survey data. Apparently, this trend has changed, with Markit’s PMI out today showing a very healthy pick up, which was confirmed by regional Fed surveys for Dallas and Kansas City. Although the output side is not showing stellar results, it… Read More

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