"Hold Onto Your Hockey Sticks" - Econ Data All Surprises
Thursday, March 14th, 2024
We have lots of economic data out before today’s opening bell, and all of it — all of it — is surprising. The biggest of these reports is the Producer Price Index (PPI), the sister report of the Consumer Price Index (CPI) numbers (which came mostly in-line with expectations), so we’ll start there: +0.6% on headline month over month was double expectations, the highest since September of last year and double what was initially reported a month ago.
Stripping out food and energy, the core PPI month over month came in 10 basis points (bps) hotter than projected, +0.3%. This one follows a 10 bps revision the previous month, to +0.5%. Ex-food, energy and trade, this figure comes to +0.4%, down 20 bps month over month. Year over year on headline leaps to +1.6% from the +1.2% expected and the +0.9% reported a month ago. Core PPI year over year is flat at +2.0%, while ex-food, energy and trade was +2.8%, up from +2.6%.
This wholesale inflation picture gets fed into Personal Consumption Expenditures (PCE) data, which is due at the end of the month. PCE is the Fed’s preferred metric of inflation, and so we can expect these numbers won’t make them leap from their chairs to start cutting interest rates. More surprising, though, is how off-kilter this data was compared to estimates when we contrast these figures against the in-line CPI report earlier this week. We saw basically no sign of meaningful wholesale price inflation in the retail CPI.
Speaking of retail, U.S. Retail Sales came in 20 bps lower than estimates, to +0.6% from +0.8% initially reported, but that’s not the biggest surprise here. Last month’s revision, the original print of which was already pretty low at -0.8%, fell to -1.1% this morning. Ex-autos was +0.3% versus +0.4% expected, but revised for the previous month down 20 bps to -0.8%. Ex-autos and gas was -0.3%, but revised previously down to -0.8% from -0.5%. Control was unchanged at +0.4%.
Initial Jobless Claims also keep stubbornly lower than anticipated: 209K versus 216K expected. So far this year, the highest week of new jobless claims was 225K — this was basically the man average of the entire previous year, which itself was befuddlingly consistently low. Continuing Claims? Same deal: for the second time in the past month of so, we’ve seen 1.9 million longer-term jobless claims per week, only to see revisions pull back below it the following week.
But this week’s data is even more severe (in a good way, ultimately) than it was the last time. Totals of 1.906 million posted last week are now revised down to 1.811 million — now 15-straight weeks below the last time we struck 1.9 million, back in November of last year. For some context, even 2 million weekly long-term jobless claims is consistent with an overall healthy labor force. This finely articulated data suggests its gotten even better. But should we expect a big revision next month?
Pre-market futures have largely looked past the possible bearish ramifications within. Actually, there are no bearish ramifications as long as the numbers all complement a strong economy, which they appear to do. But the longer the market gets used to maneuvering in a high interest-rate environment, the longer it will be until the Fed cuts interest rates. Currently, consensus for the first cut has receded back to June of this year, but if the data continues to come in good, perhaps we’ll have to hold onto our hockey sticks.
Questions or comments about this article and/or author? Click here>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Invesco QQQ (QQQ): ETF Research Reports
SPDR S&P 500 ETF (SPY): ETF Research Reports
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
