The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to post a slight improvement in the December update that’s scheduled for tomorrow (Jan. 22), based on The Capital Spectator’s average point forecast for several econometric estimates. The projection for -0.13 reflects a modest improvement over the previous month, which indicated US economic activity that’s moderately below the historical trend rate of growth. Only negative values below -0.70 signal an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Using today’s average estimate for December as a guide, CFNAI’s three-month average is expected to reflect an expansion that’s moderately below the historical trend but still above the tipping point that marks the start of a new US recession.
Continue reading →

Another day, another (modestly) disappointing economic report. This time it’s the labor market. Initial jobless claims unexpectedly increased 10,000 last week to a seasonally adjusted 293,000, the Labor Department reports. That’s still low by historical standards, but economists were looking for a modest decline. Instead, new filings for unemployment benefits rose for the week through Jan. 16 to the highest level since last July. The good news: claims are still falling on a year-over-year basis. Unfortunately, the annual decline continues to wither; the latest decrease–down 2.7% vs. the year-ago figure–is the smallest since early December.
Continue reading →

Mr. Market’s outlook has turned darker lately. The ongoing slide in stocks and oil, combined with an increase in the spread in junk yields over Treasuries, is creating deeper doubts about the strength of the US economy. The Treasury yield curve is still positively sloped, which implies that growth will survive. But some analysts say that this historically valuable indicator is less reliable these days because of extreme measures with monetary policy in recent years.
Continue reading →

● US housing starts fall 2.5% in Dec | MarketWatch
● Consumer prices drop as falling oil costs push inflation lower | LA Times
● US Redbook: retail sales growth cooled in Jan’s 2nd week | MNI
● US mortgage applications popped 9% last week | CNBC
● How to Make Sense of Plummeting Global Markets | NY Times
● Oil prices fall near 2003 lows on oversupply, demand worries | Reuters
● How Far Will Markets Fall? Top Investors See No Bottom Yet | Bloomberg