US economic output weakened in last year’s fourth quarter, according to this morning’s initial estimate of GDP. The pace decelerated to 0.7%, down from Q3’s 2.0% rise (seasonally adjusted annual rate). That’s the slowest pace since last year’s first quarter. The softer trend was broad based, showing up in virtually every corner of the major components in the calculation of the GDP data. The question now: Is the Q4 stumble a sign of things to come or just a slow patch that, as in previous years, will quickly right itself via stronger growth?
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A New York Times op-ed piece from earlier this week has reignited discussion about housing and the Federal Reserve as factors in the 2008-2009 Great Recession. Minds will differ on exactly how much of the financial crisis/economic contraction was triggered by the housing crisis. As for assigning blame to the Fed’s monetary policy, there’s a popular but misleading narrative that deserves attention: the central bank wasn’t culpable because it was cutting interest rates in late-2007 through 2008. True, but the Fed still deserves criticism based on other measures of monetary policy during that period—measures that arguably offer more insight for quantifying the central bank’s influence on the business cycle and for providing insight going forward for assessing macro risk.
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● US Jobless Claims Fall More Than Expected | Bloomberg
● US Durable-goods-orders slide in Dec, point to Q4 GDP slump | MarketWatch
● US Pending home sales rise just 0.1% in Dec | CNBC
● KC Fed Mfg Index Now Down 11 Straight Months through Jan | 24/7 Wall St
● Euro zone inflation jumps in Jan, core inflation up too | Reuters
● Bank of Japan Introduces Negative Interest Rate | RTT
● Zika Virus ‘Spreading Explosively’ in Americas, W.H.O. Says | NY Times