Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Do U.S. Economic Reports Mean Anything This Time?

Economics / US Economy Mar 01, 2014 - 10:55 AM GMT

By: Sy_Harding

Economics

Some of the Federal Reserve’s districts compile and release monthly economic reports for their regions.

In the last week or two, those reports were that the Fed’s Empire State (NY) Mfg Index plunged from 12.5 in January to 4.5 in February. The Fed’s Philadelphia Region Index plunged from a positive reading of + 9.4 in January to - 6.3 in February. The Dallas Fed’s Mfg Index dropped from 3.8 in January to 0.3 in February. The Richmond Fed’s Index plummeted from +12 in January to -6 in February.


The ISM national Mfg Index plunged from 56.5 in December to 51.3 in January, just barely above the contractionary 50 level. Within the index, the monthly decline in new orders was the largest in 33 years. The Fed’s regional indexes indicate the slowdown accelerated in February.

However, the Fed does not seem to think its indexes are of any importance. It says the economy continues on its recovery track.

Unlike in 2010, 2011, and 2012, the stock market also seems to believe this time around that negative reports are of no importance.

But when Friday morning’s release of the Chicago PMI Mfg Index showed it ticked up imperceptibly from 59.6 in January to 59.8 in February, and although remaining at a two-year low Pending Home Sales ticked up 0.1% in January, the stock market took off.

The Fed also utilizes a major measurement of national business activity, the Chicago Fed’s National Activity Index (CFNAI). It is a composite of 85 selected economic indicators that the Chicago Fed’s website says, “are drawn from four broad categories of national data: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories. Each of these data series measures some aspect of overall macroeconomic activity. . . . The CFNAI provides a gauge of current and future economic activity and inflation in the U.S.”

A composite of 85 individual measurements designed to pull together the individual monthly economic reports. If ever there was an indicator of importance to the Fed that would be it, right?

Apparently not. The index is designed to hover closely around 0, a positive number indicating growth, a negative number indicating economic contraction. The Fed even says if the three-month moving average of the index declines to - 0.70 the economy has slowed so much “it indicates a recession has begun.”

The Fed’s CFNAI collapsed from +0.73 in November to -0.03 in December. The Fed reported this week that it plunged further into negative territory at -0.39 in January.

However, that did not seem to even register in the Fed’s continuing assessment that the economic recovery continues “at a moderate pace.”

Why bother compiling all this data to produce these regional and national indexes if they mean nothing, are even meaningless to the Fed?

The Commerce Department reported on Friday that GDP growth in the fourth quarter was not 3.2% as it originally reported, but only 2.4%. That is a substantial decline from the 4.1% growth of the third quarter.

Meanwhile, if they can be believed, the economic reports for January and February, including the Fed’s own indicators noted above, as well as reports on retail sales, factory output, employment reports, housing reports, and so on, indicate the first two months of the current quarter tracked well below the downwardly revised fourth quarter.

Wall Street firms and major banks continue to slash their forecasts for the economy. They got it right that 4th quarter GDP would be revised down from 3.2% to around 2.5%. Their forecasts for the current quarter, prior to this week’s reports, seemed to range between 1.5% and 1.8%.

In 2010, 2011, and 2012, the Fed rushed in with additional new QE stimulus when economic reports indicated the economic recovery was stumbling. This time around, it seems unperturbed even though its own indexes confirm the negative reports from virtually every corner of the economy.

In 2010, 2011, and 2012 the S&P 500 fell 17%, 19.5%, and 11% respectively when economic reports indicated the economy was stumbling. This time around, investors are not at all nervous. Unperturbed by the reports, the S&P 500, and particularly the Nasdaq, managed only minor pullbacks in January before roaring back to new highs, even as the economic reports worsened.

Is it really different this time? Do economic reports mean nothing this time? The stock market thinks so.

Does the Fed also think so, or is it waiting for the market? In those prior years, it waited until the stock market had declined by double digits before rushing in almost in panic with more massive QE to rescue the economy.

With investors who didn’t return to the market until 2012 now being so enthusiastic in their determination to catch up, if this is another real slowdown and not just weather related, the Fed could find itself well behind the curve on the economy if it waits for the market this time.

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2014 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Sy Harding Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in