Chicago Fed Nat’l Activity Index: Mar 2014 Preview

The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to decline slightly to -0.26 in the March update that’s scheduled for release on Monday (April 21), according to The Capital Spectator’s median econometric forecast. In the previous release for February, the three-month average was -0.18, a reading that equates with relatively weak economic growth. Only values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Based on today’s estimate for March, CFNAI’s three-month average is projected to remain at a level that’s historically associated with growth, but at a moderately below-trend pace.
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US Economic Profile | 4.18.14

So much for pessimism. Most of the key economic reports for March are in and the general message looks encouraging… again. You can never say anything definitive about the business cycle in real time, but the data in hand today strongly suggest that the recent turbulence in some economic reports was only a temporary blip in an ongoing run of moderate growth.
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A Bullish Disconnect Between Stocks & Inflation

There’s a growing list of economic clues that suggest that the moderate pace of expansion, although battered and bruised in January and February, revived last month. Consider yesterday’s update on industrial output, which increased 0.7% in March—a gain that translates into a respectable 3.8% annual rise. Housing starts still look shaky, but most of the other key indicators at the end of this year’s first quarter point to growth. Here’s one more piece of empirical support for thinking positively when it comes to the macro trend: stable inflation expectations and a rising stock market.
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Searching For Banking Regulation’s Godiva

The Federal Reserve is mulling a new set of tougher banking rules to boost the odds that the financial system will remain sufficiently liquid when the next crisis strikes. It’s a worthy goal, if only because one day another event will surely arrive. But all the usual caveats apply when it comes to engineering outcomes in economics, starting with the sober reality that any efforts to sidestep implosion due to banking turbulence are forever linked with the potential for blowback by way of moral hazard. In fact, there can be no permanent solution for managing bank risk if the goal is simultaneously keeping the threat of bank runs to a minimum while maximizing prudence in matters of investing and lending in the private sector. The ideal regulatory prescription that promotes each of these two competing interests is in constant flux due to the ebb and flow of the business cycle.
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Asset Allocation & Rebalancing Review | 15 Apr 2014

The US stock market is nothing if not resilient. There’s no shortage of risks lurking around the world, but the American equity market shows minimal signs of relinquishing its role as the leading performer among the major asset classes. Sure, the bears mount a challenge every so often (including last week’s selloff), but any setbacks have been temporary affairs… so far. Indeed, the bulls took control again yesterday and stocks mounted a modest recovery.
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My New Book Is Available… Globally

After the release of my new book last week (Nowcasting The Business Cycle), I’ve received questions from readers outside the US on whether the title’s available in foreign markets. The short answer: Yes. For starters, the book is listed on several Amazon sites around the world. For example, you can find it at Amazon in the UK and in Germany. Within the US, by the way, it’s available through several of the usual suspects beyond Amazon, including Barnes & Noble. One book, but a world of possibility for purchasing.

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Retail Sales In March Rebound With A Roar

Retail sales increased sharply in March, rising 1.1%, the best monthly gain in well over a year. The news brings another clue for thinking that the recent economic slowdown was a temporary affair related to the weather. Indeed, today’s report also revived the year-over-year trend in retail spending. For the moment, March is shaping up as a positive turning point of significance for the big-picture state of US macro.
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