The Medicine Is Working
Markets were handed another favorable piece of US inflation news Wednesday, when producer price growth came in far cooler than expected.
Prices for final demand dropped 0.5% in December, and the prior month's increase was revised lower. The median estimate from 57 local psychics and astrologers called for a 0.1% drop. No economist out of five dozen surveyed expected a 0.5% decrease, but don't worry: That won't stop them from trying again next month.
December's MoM decline was the largest since
Getting interesting; I wonder if the Fed may leave rates unchanged in Feb and communicate that they’re still in a tightening mode but need more time to assess the crosscurrents and inflecting data. A pause-lite. This seems like one of those times when the best thing to do is exactly nothing.
Judging from his comments today, Jim Bullard would not support that. But, sadly for the American people, he is not a voting member this year.
It will be interesting to see where we are with skilled labor jobs after certain US corporations (ie Amazon, Microsoft) shed excess workers and other US corporations, who have unfilled positions) absorb those workers.
I saw that Walmart had over 1,700 software job openings as of 12/31/22 and are currently down to about 1,100 openings.
“The median estimate from 57 local psychics and astrologers called for a 0.1% drop. No economist out of five dozen surveyed expected a 0.5% decrease, but don’t worry: That won’t stop them from trying again next month.”
I understand that the price of chicken entrails is down sharply.
It would be helpful if economic data forecasts were reported more similarly to political poll results. It might be true that 0 of 50 economists forecast a -0.5% drop, but it’s also probably true that 49 of 50 economists had -0.5% within their 95% confidence interval. But instead of reporting that a forecaster is, “Predicting a PPI in the range of -0.6% to +0.4% with a mean of -0.1%,” we just see that -0.1% number.
When a poll says, “After surveying 1000 people, Candidate Smith is forecast to win 52% of the vote with an error margin of +/- 5%,” we get it, and we’re not too surprised (well most of us) when Candidate Smith then loses with only 49.42% of the votes. You polled 1000 people in a state with a 10 million population, of course there’s going to be some forecasting error. When it comes to economics though, the actual economists’ prediction gets watered down, whether by their employer, or pundits, or journalists, and all we see is the mean. Then we laugh at them when no one gets it right.
Meanwhile, when forecasts hit the number on the head like with the December CPI, we just shrug and say something about how even a stopped clock is right twice a day rather than marveling that they were actually able to nail the exact print given the literal billions of transactions that go into shaping consumer prices.
Is my understanding correct that the more deeply inverted the yield curve is, the tighter monetary policy is perceived to be and thus the higher the perceived odds of a hard(er) landing?
That is correct…although hard landing degree relationship might not be linear
Too much medicine can become toxic. The Fed is probably 1 and done. But if they are smart they will word the next increase to give themselves the most flexibility to go or not. Don’t be surprised to see employment take a swan dive once corporate profits come in weaker.
I just happened to be looking at the 3-month/10-year curve last night, and I was hoping you might comment on it. It appears to be screaming for recession, although how deep or long that recession might last is anyone’s guess.