Survey Says... Ignore The Hard Data At Your Peril
Personal spending increased only 0.2 percent in January, one-tenth below the consensus. This brings into question whether upbeat consumers are putting their money where their mouths are. Inflation-adjusted spending fell 0.3 percent, the largest drop since September 2009.
Also, Industrial Production for the month of February registered a big fat zero percent growth rate.
And how do you explain the recent drop in the CRB Index? An economy that is rapidly expanding should see a rise in commodity prices. However, in the week of March 6th; oil price dropped 8%, copper dropped 3.3%, and iron ore dropped 5%. This key growth index is down about 7% since the start of the year and has lost over a third of its value since 2014.
In addition, the latest data on department store and retail sales is alarming. Retail sales increased by just 0.1% in February, which was the smallest gain in the past 6 months. And Zerohedge reported that Bank of America data shows February department store sales fell about 15% yoy—the largest drop on record.
Yet despite any real evidence of actual economic growth, we have a stock market trading at all-time highs and a Fed that is determined to slam the brakes on “runaway” 0.9% growth. The Republicans in congress are in a battle with Democrats and Libertarians over raising the debt ceiling; and they can’t seem to get out of their own way on health care and tax reform.
Hopefully, these employment and survey anecdotes are leading economic indicators that will turn out to have foreshadowed a leg up in GDP growth. Or, they could end up being the fleeting hiccups of hope in the new President that will end up sinking in the mire of D.C. politics. If the latter case proves to be correct, survey anecdotes will soon reconcile with the persistent anemic path of a sub-par and grossly-injured economy that has been beset by asset bubbles and debt.
The stock market has priced in perfection coming from the new Administration. Unless the Donald can put some tax and regulatory meat on the bones very soon, the stock market should suffer a huge fall.