February Inflation Rises By Most In One Year; Empire Fed Misses Even As Optimism Rises To Highest In 12 Months
Following last month’s surprising surge in the Empire Fed from a deep negative number to 10.04, the March print was less exciting, declining modestly to 9.24, on expectations of an unchanged number. The new orders and shipments indexes remained above zero, though both were somewhat lower than last month’s levels, dropping from 13.31 to 8.18 and 13.08 to 7.76, respectively. Price indexes showed that input price increases continued at a steady pace while selling prices were flat. Employment indexes suggested that labor market conditions were sluggish, with little change in employment levels and the length of the average workweek. The Number of Employees index dropped from 8.08 to 3.23, back to September 2012 levels. Naturally, with reality worse than expected, all hopes were put in the future as indexes for the six-month outlook pointed to an increasing level of optimism about future conditions, with the future general business conditions index rising to its highest level in nearly a year. This is only the 4th year in a row in which optimism about the future is orders of magnitude higher than the current reality. Thank the Fed’s “wealth channel to support consumer spending.”
Luckily, since nobody needs food, gas or to heat their homes in winter, Core CPI ex food & energy was a tepid 0.2% increase in February, & 1.9% higher than a year ago – the number Japan’s Abe would kill to be able to goalseek as well.
It would be a different story if they included food & energy, the basics of survival which have gone up tremendously-inflationary style.
The preliminary results of the University of Michigan’s monthly consumer confidence survey are out.
The index fell to 71.8 from last month’s 77.6 reading.
Economists expected the index to rise to 78.0, but a weak IBD/TIPP Economic Optimism Index reading last week foreshadowed the drop in today’s release.
Bank Of America: “Today’s Stock Market Has Lost Some Of Its Ability To Reflect Underlying Economic Trends”
With Greenspan emerging from his crypt to confirm that he is now as clueless about everything as he was 15 years ago (although the absolutely zero reaction out of “stocks” to his statement that stocks are “very undervalued” is perhaps indicative that SkyNet may just be learning), it is appropriate to remind readers that this thing known as the “market” died some four years ago. What we have now is a vehicle with a “role in the policy fight to support spending” while “today’s stock market has arguably lost some of its ability to reflect underlying economic trends.” Not our words – those of Bank of America’s Ethan Harris, who, four years after the fringe blogs, finally “gets it.”
From Bank of America’s “A Market With A Mission”
Equity prices in the US and Europe have been hovering at multi-year highs. To the extent that this reflects powerful policy easing, equity markets may have lost some of its ability to reflect economic trends in exchange for an important role in the policy fight to support spending.
The ongoing climb in stocks does not look like a traditional reflation trade. US long rates remain well-behaved in face of brightening data. Equity prices thus seem to be benefiting from a diet of steadfast monetary support from G-4 central banks as well as expectations that global growth and inflation will remain tepid enough to avoid early policy exits.
A contribution exercise indeed suggests that earnings growth expectations have yet to become a key driver of US and European stock prices. Rather, improved confidence and diminished risk perceptions explain, to a significant extent, the equity price pickup in recent months. This is particular true for the euro area, where firms are still feeling the brunt of a long-lived recession.
Michael Lombardi writes: By looking at the stock market’s recent performance, one might think the U.S. economy has turned the corner and the worst is behind us. This is far from reality! The U.S. economy is fundamentally damaged, and since the financial crisis of 2008–2009, there really hasn’t been any real economic growth.
Even a novice economist will tell you: economic growth happens when general living conditions of citizens in a country improve; they are able to find jobs, they are able to maintain their standard of living, and they are able to spend and save.
Unfortunately, I see the opposite of this when I look at the state of the U.S. economy. Instead of economic growth, I actually see misery!
This Fed money printing is propping up the economy, and if it were taken away, the whole thing would crash.
Biderman’s Daily Edge: Why Stocks are Rising Even as Economy Slumps