In the coming days I’ll be publishing passages from my new book–Nowcasting The Business Cycle: A Practical Guide For Spotting Business Cycle Peaks Ahead Of The Crowd. Let’s kick off the first of several excerpts with an obvious starting point… the beginning.
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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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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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Housing starts are expected to total 930,000 in tomorrow’s update for March, based on The Capital Spectator’s median econometric forecast (seasonally adjusted annual rate). The projection represents a modest rise vs. the previously reported 907,000 for February.
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US industrial production in March is projected to increase by 0.2% vs. the previous month in tomorrow’s release from the Federal Reserve, according to The Capital Spectator’s median econometric forecast. The projected gain represents a deceleration in growth from the previously reported 0.6% rise for February.
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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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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.

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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The latest weakness in the US stock market raises a question: Is this the start of a bear market or just a correction in an ongoing bull market? For the moment, there’s a good case for arguing that the latest bout of weakness is of a temporary nature. Why? Long-term momentum, although losing altitude, is still average. The analysis is subject to change, of course, and so the week ahead may be decisive for adjusting our outlook.
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US retail sales are expected to rise 0.4% in tomorrow’s March report vs. the previous month, according to The Capital Spectator’s median econometric forecast. The prediction represents a slightly faster rate of growth over the previously reported 0.3% gain for February. Meanwhile, the Capital Spectator’s median projection for March is well below three consensus estimates based on recent surveys of economists.
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