Is The US Economy Headed For Trouble This Fall?

The global markets are predicting that the macro trend is turning ugly. In China, which is ground zero for the latest round of worries, it’s clear that growth is slowing. Given the size and influence of China’s economy, the fallout could be substantial. Does this mean that a new recession is destiny for the US? It’d be foolish to dismiss the threat that’s brewing. But it’s also clear that there’s still a positive tailwind blowing for the world’s largest economy through July. The key question: How will the trend compare in August? A compelling answer, one way or the other, will take several weeks at the earliest. Next week’s August report on nonfarm payrolls, for instance, will be a critical number for deciding if the trend is deteriorating. Meantime, let’s summarize what the numbers are telling us about the US macro trend to date.
Continue reading →

Chicago Fed Nat’l Activity Index: July 2015 Preview

The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to rise fractionally in the July update that’s scheduled for tomorrow (Aug. 24), based on The Capital Spectator’s average point forecast for several econometric estimates. The projection for 0.04 is slightly above the -0.01 reading for June, which reflects a below-average pace of economic growth for the US relative to the historical trend. Only negative values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Using today’s estimate for June as a guide, CFNAI’s three-month average is expected to reflect an expansion that’s close to the historical trend rate for growth and therefore well above the tipping point that marks the start of a new recession.
Continue reading →

One Last (Mini) Summer Holiday…

The end of the summer is in sight. How’d that happen? Hmmm… maybe my calendar’s slow. Oh, well, no time to waste. Your editor’s playing hooky for rest of the week to cash in on the waning days of August. The daily grind resumes on Monday, August 24. Cheers!

Initial Guidance | 19 August 2015

● US housing starts near 8-year high in July
● Redbook: US retail sales higher in first half of August
● Oil’s bear market rolls on as Opec plans to keep pumping
● China’s equity market remains volatile after currency devaluation
● Eurozone current account in June rises for first time in 5 months
● Japan’s department-store spending in July rises for fourth straight month
● Japan’s trade deficit widens, exports slow in July

Mixed Messages For US Housing Activity In July

Housing Starts inched higher in July, reaching a new post-recession peak of 1.206 million units (seasonally adjusted annual terms). That’s encouraging, but the news is tempered by the sharp deceleration in the year-over-year trend. The net result: residential construction activity continues to increase, but it’s still not clear that we’ll see much more than modest growth at best in the near term.
Continue reading →

Weak Inflation & Sluggish Growth Raise Doubts About A Rate Hike

Federal Reserve Vice Chairman Stanley Fischer last week advised that “a large part of the current [low] inflation is temporary.” Speaking to Bloomberg TV, he explained that “these things will stabilize at some point, so we’re not going to be as low as we are forever.” Based on recent action in the Treasury market, however, the crowd’s still expecting low-flation to roll on for the near term.
Continue reading →