US industrial production in January is projected to increase by 0.4% vs. the previous month in tomorrow’s release from the Federal Reserve, according to The Capital Spectator’s median econometric forecast. The projected gain represents a slightly faster growth rate vs. the previously reported 0.3% rise for December. Meanwhile, the Capital Spectator’s median projection for January is above three consensus forecasts based on recent surveys of economists.
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Retail sales slumped in January, delivering a bigger-than-expected decline. This morning’s update on weekly jobless claims only added to the disappointment, albeit mildly so. New filings for unemployment benefits increased a bit more than forecast, rising 8,000 to a seasonally adjusted 339,000. The prevailing theory among the optimists is that an unusually harsh winter is temporarily weighing on economic activity. That’s a narrative that’s a bit easier to embrace at the moment as a powerful winter storm continues to move up the Eastern seaboard of the US this morning.
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The Tea Party Patriots are angry… again, or at least one of member of the political group isn’t a happy camper on learning that the House of Representatives passed an increase in the federal government’s debt ceiling to pay its previously approved bills. “A clean debt ceiling is a complete capitulation on the speaker’s part and demonstrates that he has lost the ability to lead the House of Representatives, let alone his own party,” charges Jenny Beth Martin, a co-founder of the Tea Party Patriots. “It is time for him to go.”
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US retail sales are expected to rise 0.2% in tomorrow’s January report vs. the previous month, according to The Capital Spectator’s median econometric forecast. The prediction matches the previously reported 0.2% increase for December. Meanwhile, the Capital Spectator’s median projection for January is above a trio of consensus estimates based on recent surveys of economists.
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The wide array of returns for the major asset classes in recent history continue to present investors with a study in contrasts. The varied performances also represent a real-time experiment for navigating the rocky terrain of behavioral economics. A wide set of trailing returns are the raw material for a productive round of rebalancing, at least in theory. But it’s also typical to wonder if paring the allocations in the winners and raising portfolio weights in the losers is a smart move this time. Ample return spreads between asset classes look attractive on paper, but rebalancing your portfolio in a bid to capture the expected opportunity is always psychologically challenging. Indeed, it’s hard to buy assets when there’s blood running in the streets. Why? In the dry language of econometrics it boils down to one question: Does reversion to the mean still apply? Deciding how and when to rebalance is never easy or even obvious. But in the long run, it’s the only game in town for a multi-asset class portfolio. But it always comes with risk.
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The US economy in this year’s first quarter is expected to expand by 2.6% (real seasonally adjusted annual rate), according to The Capital Spectator’s median econometric nowcast. This is the initial estimate for the quarter that uses limited Q1 data and so the projection is a preliminary review that will be updated several times in the weeks ahead as new economic indicators are published and existing data are revised. The final nowcast for the quarter will be published shortly ahead of the official Q1:2014 GDP report. The US Bureau of Economic Analysis (BEA) is scheduled to release its “advance” Q1 estimate on April 30, 2014.
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● The Affluent Society Revisited
By Mike Berry
Summary via publisher, Oxford University Press
This book revisits John Kenneth Galbraith’s classic text The Affluent Society in the context of the background to, and causes of, the global economic crisis that erupted in 2008. Each chapter takes a major theme of Galbraith’s book, distils his arguments, and then discusses to what extent they cast light on current developments, both in developed economies and in the economics discipline. The themes include: inequality, insecurity, inflation, debt, consumer behaviour, financialization, the economic role of government (‘social balance’), the power of ideas, the role of power in the economy, and the nature of the good society. It considers the current problems of capitalism and the huge challenges facing democratic governments in tackling them.
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Private nonfarm payrolls revived in January after December’s tepid rise, but the rebound was well below expectations. Cold weather is again blamed as throwing a wrench into the jobs machine. Whatever the cause, private-sector employment increased just 142,000 in January over the previous month. Only December’s weak 87,000 advance is lower for the past year-and-a-half.
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Private nonfarm payrolls in the US are expected to increase by 173,000 (seasonally adjusted) in tomorrow’s January update from the Labor Department, according to The Capital Spectator’s median econometric point forecast. The projected rise is roughly twice as high as the previously reported increase of 87,000 for December. Meanwhile, The Capital Spectator’s median January projection is in the middle of a pair of consensus forecasts, based on surveys of economists.
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Jobless claims fell last week, retreating 20,000 to a seasonally adjusted 331,000. The drop was large enough to push the crucial year-over-year change down to an 8.3% decline from the year-ago level. But new claims are still wandering in a range: roughly 300,000 to 350,000 so far this year. Is unusually cold temperatures and a harsh winter in some parts of the US to blame for the relatively sluggish performance of late? That’s a possibility, although we’ll know for sure in the coming weeks if that’s a viable explanation as more data is published. Meantime, today’s claims release offers a bit of mild encouragement in the sense that new filings for unemployment benefits aren’t consistently trending higher. But there’s no downside momentum either and so the jury’s still out on what it all means.
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