Data Watch

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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One of the few reasonable arguments for the case that the US economy is near full employment, and that the Fed’s short term interest rate target should be lifted, is that the unemployment rate is low. Indeed, the jobless rate is fairly low from an historical perspective, but it is just one of many important indicators and doesn’t tell us enough about the state of the economy to fully inform monetary policy decisions. This is the conclusion one would be forced to draw even if one subscribed to the conventional, inflation targeting view, the view that we at NGDP Advisers… Read More

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The unofficial, “flash” PMI for the manufacturing sector from Markit did not show the upturn seen in some recent regional Fed manufacturing surveys. The Philly Fed last week and the Kansas City Fed yesterday had both shown significantly positive readings for manufacturing in their regions. The lack of follow through will disappoint bulls, especially after some positive readings from the NAHB about the confidence of builders of single-family homes in September. All in all, the early trends for September look mixed and likely unable to recover a lot from the bland-looking August. The implication being that 3Q 2016 GDP growth… Read More

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The headlines are wrong: Inflation is not “firming” On the CPI release today we read versions of this headline: Consumer prices moved higher in August, a sign that U.S. inflation may be continuing to firm after years of sluggish price growth. There can only be an “inflation problem”, by which it is meant that inflation is on a rising trend, if NGDP growth is also on a rising trend. The charts illustrate. I use the PCEPI because that´s what the Fed targets, but the picture for the CPI would be the same. From the mid-1960s to the late 1970s, rising… Read More

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It´s not, as the WSJ would have it that “Cooling Indicators Suggest Slower Recovery”, but that the slowing recovery is cooling indicators! In mid-2010, the Fed consciously capped the recovery that had begun four quarters earlier, in June 2009. For the past two years, since it began its on/off threat of rate hikes, the already slow recovery is slowing down further. No wonder retail spending, industrial production and other spending categories are deflating. It´s not the Fed that is data-dependent, but the data that appears to be Fed-dependent. And there´s no end in sight to the Fed´s misguided reasoning, in… Read More

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August surveys of manufacturing have been almost uniformly poor, showing negative growth. It was no surprise that consensus expectations for Industrial Production were low, but the figures came in even lower and the prior month was revised down. The negative YoY trend for the index was thus reinforced, down more than 1%. the subset of Manufacturing Production, that excludes energy production, was also expected to be weak and yet came in even weaker and with the prior month downgrade too. As a result, a sort of promising break to actual growth YoY became a negative YoY trend. Since 1919, a… Read More

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The August NFIB survey fitted in with other industry-side surveys from both manufacturing and services sectors. Current job openings rose quite strong mirroring the Job Openings survey, but it is unclear how meaningful these indicators are. Increased ease of advertising openings may mean there is a secular change occurring in the job search market. It may mean that strong secular change within employment as tech employees are more needed than ever but are hard to find at any price. That said the trend probably means most of all that there is just not enough money or sales to bid up… Read More

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The official PMI from ISM for the huge non-manufacturing sector fell heavily in August. It had been holding up remarkably well at 55 or so, but was oddly above the much poorer trend seen in its less well-established competitor survey of services from Markit. Well, now it has fallen to the same barely growing level of 50. Within the components it seems as if new orders and export orders were very weak, and retail and wholesale trade particularly hit. The employment component did weaken but service sector firms are not yet laying off staff. This is a positive sign for… Read More

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The auguries for the August payrolls have not been good judging by industry-side surveys of August activity, and they still disappointed expectations. Monthly jobs growth was relatively weak. With the participation rate flat there were not enough jobs created to keep pace with entries into the labour force and so the unemployment rate ticked up to 4.9%. No big deal and certainly nothing to move markets or expectations about Fed action. What should trigger Fed action and more concern generally is the very weak Average Weekly Earnings (AWE) number. It is derived from two more commonly watched numbers, Average Hourly… Read More

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