THOUGHTS ON THIS MORNINGS DATA
Another mixed bag of data this morning. Most alarming is the continuing trend in negative consumer data. As we all know by now, yesterday’s retail sales data was weak at best – something we’ve been reporting on here at TPC weekly thru our ICSC and Redbook data reports.
Consumer sentiment readings continue to trend in-line with broader spending habits. This morning’s reading came in at 63.2 – almost 5 points below consensus. This continues to represent the broader economic themes we are seeing; deflation in the things we own and inflation in the things we need.
CPI came in flat which is reflective of the sluggish economy. This morning’s data was in-line with estimates at 0%. The lack of pricing power across the broad economy is in-line with the lack of expansion in corporate revenues. There is little demand for goods and even less pricing power. I’d love to spin this into a positive, but it simply displays the death grip that deflation continues to maintain on the broad economy.
On the bright side, capacity utilization and industrial production posted slight improvements. This is a clear sign that the recession is likely to end in the upcoming quarter. Unfortunately, the rebound in both indicators show clear signs of the sluggish and below trend recovery we are likely to see. It won’t be a technical recession, but it will probably continue to feel like one.
All in all, this morning’s data nicely summarizes the themes we continue to focus on here at TPC. The consumer is weak, deflation remains the bigger concern and the recovery (if we can call it that) is likely to be far from v-shaped. As for the markets, complacency remains the name of the game. Own equities at your own risk – which I believe are highly elevated currently….
TPC,
Excuse me for asking a question that’s unrelated to this article. How would it affect the stock market when HFT(high frequency trading) is banned on September 1st given that some claim 70% of trading volume is related to HFT? Perhaps other reader can comment on that also. Thanks
Dow Transports are giving it up today. I wonder what effect that will have on Dow theorists interpretation of the recent bull market signal?
Jenny,
I am probably the wrong person to ask about HFT. I really don’t have inside knowledge of HFT and therefore have been unable to formulate a reasonable position. It seems to me as though even the experts are confused about the ramifications of HFT….
Perhaps some readers have some thoughts on it?
Ackman, it’s interesting to note that the rails have been in a non-confirmation for months now. I am astonished that the rail data continues to come in so weak. The comps have to be getting very easy as we get into September. The fact that we are still down 16% year over year is amazing. I would expect it to rise in the coming months. Without positive readings in Q4 we can all but guarantee that the recovery theorists will be disappointed.
Also, there is a sense of “buy the dip no matter what” on TV this morning. Everyone on Bloomberg and CNBC have been saying the same thing. That is what happens at tops. Everyone is optimistic and remains so until the market cracks….
HFT isn’t going to be banned any time soon I don’t think… You’re probably thinking of flash trading… They’ll just figure another way to use HFT algo’s to abuse things.
On topic: According to my back of envelope calculations, we’ve lost 40% of our industrial production since Jan 08… And that is WITH easy money policies which should stimulate investment and greater leverage for manufacturing firms…
Just wait till interest rates spike.