I don’t think today’s FOMC decision is going to be a big market mover but one of the things I’m hoping that Powell reveals is the data points that he’s watching most closely for signs of a turn in the economy.
Everyone has seen the soft survey data — which is oftentimes (but not always) a forerunner of softness in the real economy. So what data points are going to reveal that softness?
The Fed might not indicate what it’s watching but Bank of America economists today highlighted a few spots, along with the resilience in hard data so far.
Hard data counters the soft data” and investors should “Pay attention to what I do, not what I say” when it comes to consumers and biz’s:
On Monday retail sales were better than we expected as the control group rose by 1.0% m/m. Then yesterday, industrial production (IP) soared past expectations due to a surge in manufacturing—particularly autos and durables ex autos…The strength of these data reinforce our view that actions speaker louder than words when it comes to activity…Consumers and businesses are right to be more concerned about the outlook…But the signal between survey-measures and real activity has deteriorated too much in recent years to be seen as reliable. Therefore, we will instead be watching claims, capex and card spending data for signs that activity is weakening. Until then, we remain constructive on the US economy.
As for Bank of America, their latest card spending data showed credit and debit card spending per household declined 2.3% year-over-year in February, though that could be skewed by the leap year in 2024. Adjusting for that, they noted a +0.3% m/m reading
One caveat was that restaurant spending fell, something we also saw in the retail sales report. That line of spending is particularly economically sensitive and is often one of the first things cut.
h/t @Neil Sethi
