Purchasing manager data released in early August suggested a firming US economy
with clear suggestions of further strength ahead. The weekly leading economic data
sets I follow also suggested a better pace for the economy, especially with initial jobless
claims dropping down. This info strengthened the hand of those folks who have been
claiming the Fed is set to cut the pace of QE soon. Thence comes the whipsaw. Cisco
Systems is battling a soft patch and is adding to layoffs. Macy's sees softness in sales
and today, Walmart -- the largest US retailer -- reports lighter traffic as a combination of
higher payroll taxes and mildly accelerating inflation cuts into consumer spending
power. Today, the Fed reported flat industrial production for July, and retail sales,
although up 5.4% yr/yr, barely budged forward in July. The past month was sluggish
indeed for the economy and company and Fed regional data suggest the opening weeks
of August were slow as well.
Should the economy pick up going forward, then there will be no discrepancy between
the leading indicator data and recent reports on sales and output. We will just have to
wait several weeks to see if the recent upturn in the leading data, including strong new
order numbers from the PMI reports, were one shot wonders or not.
My coincident economic indicator, which measures the very basic economy on a yr/yr
basis, came in at +1% for July. It shows a continuing sluggish economy with a down-
trend in momentum still very much intact. Hopefully, readings for Aug. and Sep. will
confirm the recent pick up in leading indicator data via a positive turn in the
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!