This morning’s data is almost exactly what the Fed is not hoping for – signs of weak consumer growth and inflation.  Let’s take a look at each piece:

  • Robust signs of consumer spending in Q4 appear to be a flash in the pan.  Earlier reports of a slow-down in consumer spending were confirmed by this morning’s retail sales report.  Headline sales for January were positive at 0.3%, however, the gains are largely attributable go gasoline price increases.  Analysts were expecting a 0.5% increase.  Gasoline sales were up 1.4% while housing related goods showed notable weakness.  The commodity price increase is starting to pinch consumer wallets – not the results the Fed is looking for from keeping “assets higher than they otherwise would be”.
  • Manufacturing continues to show signs of life as the Empire State Manufacturing survey remains consistent with recent reports.  The NY region said business conditions were marginally improved over last month.  The index rose to 15.43 from 11.92 last month.  New orders slowed slightly while hiring slowed to just 3.61 – not good forward looking indications.  All in all, it was more mixed than the headline figure might make you think.
  • Import prices jumped 1.5% in January vs expectations of 0.8%.  The gains are primarily in non-core inflation with food and energy remaining very volatile.  Energy costs were up 14.3% while food prices are up 14.8%.  Prices for other finished goods was just 0.1%.  This is consistent with the pinch seen in the retail sales report.   None of this really bodes all that well for the future outlook as consumer spending appears to be trailing off somewhat and prices cut into spending.  Is stagflation in our future?

Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

More Posts - Website

Follow Me:


  1. And the market response – down a few points and likely to rally back by days end. Sigh….

  2. “Fedex up 2% after warning yesterday”

    Gotta be driving bears(the remaining ones) crazy :-)

  3. A+! I’ve had the stagflation word back in my mind for a while now; but as far as I am concerned; you are the first/one of the firsts that is bringing it back. Who created the missery index?

  4. I am not a bear, but this is the most blatant case of market manipulation I have ever seen. Since when did poor retail sales, high inflation and a FedEx miss ever bode well for the market? The S&P 500 is basically flat today and every dip has been met with someone buying? Investors are now conditioned by the reckless Fed.