One step forward, one step back. Residential construction activity was softer than expected in January while industrial production rocketed skyward after falling in each of the previous three months, according to this morning’s updates from the US Census Bureau and Federal Reserve, respectively. Today’s economic data overall offers a mildly upbeat message. Considered in context with previous releases for January, the data du jour suggests that last month wasn’t the start of a new NBER-defined recession. The near-term outlook is still wobbly, but this morning’s reports hint at the likelihood that the US economy will continue to muddle through the recent rough patch and avoid a new downturn.
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Last week’s deep dive in Treasury yields continued to reverse course yesterday, offering a reprieve to the aggressive risk-off posture that’s been roiling markets lately. Today’s twin updates on US industrial production and housing construction for January will help determine if the crowd’s latest round of optimism is warranted. But for the moment, it’s clear that the bond market is having second thoughts about the wisdom of pricing in high odds of new recession. Until further notice, the feeling is mutual over in equityland as of yesterday’s sharply higher close.
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● NY Fed mfg index in Feb shows contraction for 7th straight month | RTT
● Homebuilder confidence wanes in Feb. dipping to 9-mo low | HousingWire
● Fed’s Kashkari: More steps needed to prevent meltdown repeat | WaPo
● The Stock Market Is Not the Economy | Strategy+Business
● Why New OPEC deal may not increase oil prices | USA Today
● UK: Oct-Dec Jobless Steadies As Wage Growth Falls | MNI
● China sends missiles to contested South China Sea island | Reuters

US industrial production is expected to post a 0.1% rise in tomorrow’s January report vs. the previous month, according to The Capital Spectator’s average point forecast for several econometric estimates. The prediction anticipates the first monthly increase in five months.
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Housing starts are expected to total 1.157 million units (seasonally adjusted annual rate) in tomorrow’s January update, according to The Capital Spectator’s average point forecast of several econometric estimates. The projection represents a modest increase over the previous month’s level of residential construction activity.
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If the Atlanta Fed’s GDP nowcast for US economic activity in the first quarter is accurate, the macro trend is accelerating in the new year after a weak Q4. If the GDPNow model’s prediction holds, we’ll also have confirmation that Mr. Market laid an egg with his recent recession warning.
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● ECB’s Draghi hints at more stimulus | USA Today
● German ZEW Indicator of Economic Sentiment Continues to Deteriorate | ZEW
● Saudi Arabia and Russia Agree To Oil-Output Freeze | Bloomberg
● US Recession Risks Bubbling Up But How Probable Is That Outcome? | Forbes
● UK inflation rises to 12-mo high in Jan | MNI
● Left-Leaning Economists Question Cost of Bernie Sanders’s Plans | NY Times

The safe-haven trade remained in force during last week’s trading activity for the major asset classes, based on a set of proxy ETFs. Bonds were the clear winner for the five trading days through Feb. 12, with the SPDR Barclays International Treasury ETF (BWX) leading fixed-income higher for the second week in a row with a solid 1.4% total return. The modestly weaker US dollar has been a factor in boosting performance of foreign bonds in unhedged terms. Note that the US Dollar Index has eased in each of the past two weeks. Meanwhile, US REITS (VNQ) posted last week’s biggest decline among the major asset classes, tumbling 4.4% for the week just passed.
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● Strong US consumer spending counters recession fears | Reuters
● US Consumer Sentiment Unexpectedly Deteriorates In February | RTT
● US inventory-to-sales ratio hits highest level since 2009 | Reuters
● China’s Exports Fall More Than Forecast | RTT
● Chinese Start to Lose Confidence in Their Currency | NY Times
● For Some, It’s Time to Look Overseas Again | NY Times
● Oil Near $30 as Iran Loads for Europe, China Imports Fall | Bloomberg

● Postcapitalism: A Guide to Our Future
By Paul Mason
Review via The Guardian
Mason, like Marx, believes that capitalism will collapse under the weight of its own internal contradictions. These include unsustainable levels of debt on the part of both individuals and nations (“2008 was the tremor in advance of the earthquake”). In addition, the rise of information technology will corrode market mechanisms, erode property rights and destroy the relationship between wages, property and work. All this, plus burgeoning inequality, the inevitability of climate change and continued population growth, will open up the possibility of a brave new world. The alternative, warns the author, is chaos.
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