Tomorrow’s report on industrial production for May is projected to post a 0.2% gain, based on The Capital Spectator’s average econometric forecast (seasonally adjusted). The expected increase is modest, although it represents a substantial rebound vs. April’s 0.5% decline. Meanwhile, the Capital Spectator’s average projection for May is at the upper range of expectations relative to three consensus forecasts based on surveys of economists.
Two Economic Updates, Two More Reasons For Optimism
A pair of economic reports out today offer another dose of data for thinking that modest growth will continue to dominate the macro outlook for the foreseeable future. Retail sales rebounded handsomely last month after a weak gain in April. Meanwhile, initial jobless claims dropped by a robust 12,000 last week to a seasonally adjusted 334,000, which is close to a five-year low. Business cycle risk, in short, still looks contained.
Frequency Risk
Financial planner Carl Richards advises that “what you don’t know about your portfolio may help you.” He laments that watching the market has become a “spectator sport” and that obsessing over the daily or even minute-by-minute fluctuations isn’t all that useful for most investors; in fact, there’s a good case for arguing that this behavior probably reduces performance. “Knowing doesn’t help,” he writes.
Macro-Markets Risk Index | 6.12.2013
A markets-based profile of US economic conditions has deteriorated in recent weeks, although business cycle risk still looks low from an historical perspective. The Macro-Markets Risk Index (MMRI) closed yesterday (June 11) at 10.5%. That’s down sharply from 16%-plus levels reached last month. Even after the recent decline, MMRI remains well above the danger zone of 0% and within the roughly 10%-to-17% range that’s prevailed so far in 2013, albeit at the bottom of this year’s range. When MMRI falls under 0%, recession risk is elevated; readings above 0% equate with economic growth.
US Retail Sales: May 2013 Preview
Tomorrow’s update on US retail sales for May is projected to increase by 0.6% vs. the previous month, according to The Capital Spectator’s average econometric forecast. That compares with a 0.1% gain reported by the Census Bureau for April. Meanwhile, the Capital Spectator’s average projection for May is slightly higher than forecasts based on recent surveys of economists.
Looking For Macro Policy’s Sweet Spot
How can both sides be right and wrong at the same time? Well, it’s economics, for a start. And if we’re talking of the dismal science, then timing is a factor too. No wonder that the debate about austerity, which has been called everything from “the greatest bait-and-switch in history” to the only path to enlightened policy because “spending cuts can improve both the budget and the economy.”
What’s The Message In The Ongoing Slide In Inflation Expectations?
It’s still a mystery… for now. The sharp divergence between rising stock prices and falling inflation expectations has persisted since February. It’s unclear what this striking uncoupling means, but surely it signals a change of one sort or another for monetary policy, the macro trend, the capital markets… all of the above? For now, the only point of clarity is that equities are no longer joined at the hip with changes in the market’s outlook for inflation. It’s the end of the new abnormal, the positive link in recent years between stocks and inflation expectations, based on the yield spread between the nominal 10-year Treasury and its inflation-indexed counterpart. The question is what comes next?
Book Bits | 6.8.13
● Fate of the States: The New Geography of American Prosperity
By Meredith Whitney
Review via ChiefExecutive.net
In the course of U.S. economic cycles, geography played a key role in the rise and fall of regional economies. This is no longer true. In today’s economy where all most businesses need is access to high-speed data networks, proximity to airports, an interstate and a college-educated labor pool, there’s no physical reason why Boeing cannot build airplanes in South Carolina instead of Washington State. Financial analyst Meredith Whitney, who made a name for herself for spotting the subprime mortgage crisis a year before it happened, forecasts a major economic shift in her recent book, Fate of the States: The New Geography of American Prosperity. “Voters and communities are starting to realize just how closely tied their personal economic well-being is to their communities’ fiscal well-being,” she writes. “Voters in mismanaged states, the ones now flushing away jobs, are rising up and putting their feet down. Unemployed workers are packing up their families and relocating to low-tax, non-budget-crunched states like Texas and North Dakota in order to find work.”
Same Old, Same Old: Modest Growth For The Labor Market
If May is a tipping point that leads to nasty things for the business cycle, it’s not obvious in today’s payrolls report from the Labor Department. Although quite a lot of ink has been spilled in recent weeks about weak numbers from certain sectors in the economy, it appears to be business as usual with jobs creation. Slow growth, in short, continues to persist.
A Modest Drop In Last Week’s Unemployment Filings
Jobless claims fell for the week through June 1, slipping 11,000 to a seasonally adjusted 346,000. That leaves the number of claims close to middling relative to the range for the last several months. Although the new filings have been moving sideways lately, it’s still encouraging that this series isn’t moving higher in the wake of wobbly data in other economic news.