WASHINGTON (MacNews) – The explosive snapback of consumer demand, company supply-chain and delivery workarounds and inventory reloading won’t be reflected nearly to the phenomenon’s full extent in Tuesday’s May retail sales report.
Just as goods and services productivity being supercharged by firms compensating for the post-pandemic jamming of the economy won’t show up in quarterly productivity figures until after it has become obvious.
In other words, the nation’s 1940s system of economic data measurement that has only partially been supplanted by high-frequency, sometimes daily data lets policymakers fly blind just when abrupt change is under way.
The Bureau of Labor Statistics, the Census Bureau and the Bureau of Economic Analysis know how to do their job a lot better. But a near-sighted bandwidth-limited Congress won’t let them do it. Let the tribal culture wars prevail, infecting the legislative horizon machinery so it atrophies further, holding back a nation whose citizens are anxious to move ahead.
That’s the view of the optimistic pessimists, who see a net-debtor nation with a falling birth rate deluding itself as it pays relatively little attention to the future yet beating most of the world in its comeback far faster than even its own leaders realize.
A VIX anxiety index under 16, a U.S. 10-year yield under 1.5%, a Bitcoin that can go as low as $31,400 (Tuesday) or back to $37,300 (Friday), a gyrating stablecoin index, an S&P 500 index flirting with a new record high and then achieving it, a May CPI report that heads for the moon even when its flywheel shelter index decelerated, a household wealth report that jumps $3.2 trillion in the first quarter despite the pandemic and a budget deficit of more than $2 trillion with still four months to go in the government’s fiscal year – what a week just past. But it’s the future that is at stake and somehow we’ve got to focus on it.
The Biden administration makes a somewhat feeble argument that now is a time of opportunity to overcome the structural impediments allowed to eat away at the pillars of economic growth. The White House preaches that we do something smart now or otherwise China will “win.”
China, on the edge of the demographic cliff its leaders engineered, with a population aging faster than even its world-beating growth rate can overcome, is as resistant to the increase in immigration as the United States though not as much as super-insular Japan. More working age producers and customers are not welcome if they’re of a different hue or origin.
Is it really China we’re up against, or all the constraints we’ve built on our own, keeping us from approaching the success of which we’re capable.
So does American experience a sort of dead-cat bounce in the months ahead, surging ahead but just for a while? Even the Biden administration sees growth only in the neighborhood of 2% for the years ahead.
Or does the country emulate AMC, the purveyor of movieland fantasies, and recharge its batteries while the sun shines? AMC has embraced the gift of the Reddit crowd, not asking the gift horse to make any sense. It’s a horse. Ride it.
For the United States, the wave of vaccine success is also a gift, to be exploited or ignored. Vaccine success is a one-time event, a booster rocket that is either the foundation of economic rebirth or tossed aside. Can the country use its new momentum to build for future momentum?
What about this crippling inflation? Anyone who has paid attention to those post-ISM report briefings has gotten the message those missing truck drivers, those slow shipments from China, those bare shelves in the warehouse have not been crippling after all. Many firms have awakened to the challenge of being clever.
Fed chief Powell will be instructing us all on the magical properties of “transitory” when he faces reporters Wednesday afternoon. It has worked so far to lift the gaze beyond the acceleration of price hikes to the inevitable disinflation on the other side, when warehouses are full again, prices stop rising so fast and government largesse evaporates with the fading of summer.Incidentally, Steve Beckner has an extensive preview of the FOMC meeting on the macenews.com site as well as a preview of some likely changes in the administered rate plumbing.
Just like it doesn’t take a worldwide environmental pact to kill the vibrancy of the oil industry – just capital constraints – it doesn’t take price hikes to increase inflation. It takes sustained price hikes that never end to do that. Increased supply and deflated demand will eventually moderate sustained price hikes. Sure, a car will cost more, but stabilized higher prices are not inflation.
The housing starts number on Wednesday will likewise fail to capture the essence of housing deprivation. Demoralize first-time home buyers for a few years and what you get is political change down the road. For now, it’s just a housing market glitch, not the catalyst for fundamental construction industry and political change that’s building among the twenties-something generation.
If all that’s the view of the optimistic pessimists, what do the pessimistic optimists see ahead? They’ve given up on this era’s Congress, for one thing. But being optimists they see how change has been forced on legislatures, how some key functions are reassigned, evolved and recalibrated just as legislatures once replaced nobility, shoved monarchies aside and were guided into new forms by the imperatives of national survival.
Meanwhile, the upcoming week’s data points, some particularly relevant in this era of rapid rebound and some irrelevant, are listed below:
UPCOMING ECONOMIC DATA AND FEDERAL RESERVE EVENTS
Monday, June 14 – none
Tuesday, June 15 – Two-day FOMC meeting begins
Tuesday, June 15 – 8:30a ET – NYFed’s June Empire State mfg index (May 23.3)
Tuesday, June 15 – 8:30a ET US May retail sales (Apr unchanged, Mar +10.7%)
Tuesday, June 15 – 8:30a ET US May PPI (Apr +0.6%/annual +6.2%)
Tuesday, June 15 – 8:55a ET – Johnson-Redbook wkly retail sales (prvs +14.5%)
Tuesday, June 15 – 9:15a ET – Fed’s May industrial production (rev Apr +0.7%)
Tuesday, June 15 – 10a ET US Apr business inventories (Mar +0.3%)
Tuesday, June 15 – 10a ET NAHB June housing price index (May 83, Apr 83)
Tuesday, June 15 – 4p ET US Treasury Apr TICS (Net Mar LT $224.7B)
Wednesday, June 16 – 7a ET US MBA wkly mortgage apps (prvs -3.1%)
Wednesday, June 16 – 8:30a ET US May hsing starts (Apr 1.569 mln/-9.5%)
Wednesday, June 16 – 8:30a ET US May import prices (Apr +0.7%, Mar +1.4%)
Wednesday, June 16 – 10:30a ET US wkly EIA oil stocks (prvs -5.2 mln bls)
Wednesday, June 16 – 10a ET US Atl Fed infl expectations (prvs 2.8%)
Wednesday, June 16 – 2p ET FOMC policy statement, new ‘dot plot’
Wednesday, June 16 – 2:30p ET Fed Chair Powell news conference
Thursday, June 16 – 8:30a ET US wkly initial jobless benefit claims (prvs 376K)
Thursday, June 16 – 8:30a ET US Philly Fed mfg index (May 31.5)
Thursday, June 16 – 10a ET US May leading indicator (Apr +1.6%, Mar +1.3%)
Friday, June 17 – 1p ET Baker-Hughes wkly rig count (pvs US +5/461)
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Contact this writer: denny@macenews.com.
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