Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

U.S. Monetary Policy Kaleidoscopic Context

Interest-Rates / Money Supply Mar 22, 2016 - 08:12 PM GMT

By: Mike_Shedlock

Interest-Rates

Dennis Lockhart, Atlanta Fed president, made a speech today trumping up the possibility rate hikes as soon as April.

In his speech, Lockhart cited "sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April."

Let's dive into his speech and also put a spotlight on his claim of "sufficient momentum."


Kaleidoscopic Context for Monetary Policy

The title of this post comes from the title of Lockhart's speech to the Rotary Club of Savannah Kaleidoscopic Context for Monetary Policy.

Here are some snips, emphasis his, not mine. Typos not corrected.

An important question is whether to view the fourth quarter as a one-off aberration or a sign of slowing growth. Since we're still in the first quarter of 2016, it's a little early to come to a definitive conclusion. But we are able to gauge the strength of economic momentum in real time using a method we call a nowcast (as opposed to a forecast). A nowcast takes each data point as it comes in and adds it to a model-based computation of the growth rate of gross domestic product (GDP) on an annual basis. Such a computation is sometimes called a tracking estimate. The data we have in hand as input to this estimate run through January, with a few data points for February. Our tracking estimate for the first quarter is currently 1.9 percent.

Short of some big shock that turns consumer psychoIogy on its head, I see no reason why consumer spending growth should not continue. I think the conditions supporting this engine of economic momentum are likely to hold steady. I should add to the list the so-called "gasoline dividend." Although slower than expected to show through in consumption patterns, lower oil prices and lower gasoline prices should bolster the economy through the consumer channel.

The incoming economic data have been, admittedly, mixed since the momentous December meeting of the FOMC (the meeting at which the Committee raised its policy rate for the first time in almost a decade). We policymakers face some ambiguity. In my experience, this is almost always the case. But overall, I see the recent data as positive. I believe a forecast of sustained moderate growth momentum is realistic and remains the likely scenario. In my opinion, there is sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April.

Spotlight on Sufficient Momentum - Existing Home Sales

March 21: Existing Home Sales Plunge "Surprising" 7.1%, Price Concessions the Norm; What Happened?

Existing Home Sales

Averaging things outs, we clearly see sales accelerated from February of 2015 through June of 2015. Since then, sales have decelerated.

The sudden plunge in November sales (released December) was due to change in disclosure rules called "Know Before You Owe".

The bounce in December and January sales was most likely due to delayed closings in November and December. That bounce is now over.

Spotlight on Sufficient Momentum - Retail Sales

March 15: Retail Sales Down, January Sales Revised to -0.4%

Respectable Strength?

Retail Sales

It's amusing watching Econoday attempt to spin every conceivable thing positive. Somehow, retail sales at -0.1% on top of a huge downward revision is allegedly indicative of "respectable strength in February".

Reader Tim Wallace pinged me with this pertinent comment: "Down 0.1% in January means February retail sales were actually down 0.7% from January's initially reported number."

Respectable Not!

Spotlight on Sufficient Momentum - Manufacturing Shipments

March 3, 2016

Manufacturing Shipments

I put that chart together today with dated updated as on March 3.

There has never been a dip like this outside a recession or leading up to a recession.

Heading into the 2001 recession, the decline in shipments was a leading indicator. In the 2007-2009 recession, shipments were a lagging indicator. I suspect housing overly distorted the prior recession.

Leading or lagging, Lockhart is wrong either way.

GDPNow - March 16

GDPNow

Questions of the Day

Question 1: Is Lockhart even watching the momentum of his own researcher's model?

Question 2: Is 1.9% and falling really sufficient momentum to hike or does Lockhart have Kaleidoscope Eyes?

Long-time Mish readers know what's coming up: A musical tribute.

Reflections on Momentum

The next Atlanta Fed GDPNow release takes place on March 24.

I have a difficult time gaming how GDPNow will react to economic reports but I strongly suspect today's existing homes sales report will knock 0.3% or so off the previous forecast.

The PMI manufacturing index comes out on Marc 22, the new home sales report on March 23, and durable goods orders on March 24.

New data aside, I agree with Lockhart there is "momentum". However, that momentum is "sufficiently" in the wrong direction.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2016 Mike Shedlock, 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.

Mike Shedlock 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

6 Critical Money Making Rules