The weekly leading indicator data sets I use have flattened out in
recent weeks following steep decliness dating back to mid-2007.
These indicators are recession-consistent and the flat recent
readings have yet to challenge strong downtrends in place.
If the BEA measured inflation pressures more realistically, it is
very likely the case that real GDP was down in quarters 4'07 and
1'08. Not big downs mind you, but downs which show broadening
economic weakness in the private economy, save for powerful
Civilian employment data (which leads the less volatile but often far
more tardy payroll data) recovered some in April, but is up just 0.4%
yr/yr. Real wages likely declined slightly yr/yr, and this combo
underwrites the weakness in the system. Companies are moving
swiftly to dick over their huddled workers. Since, rebates are coming,
the chieftains argue, why give out nice raises in a lousy environment.
Other employment data is mixed. Help wanted web postings have
been rising nicely since yearend, but mass layoffs are up sharply, too.
If companies opt to beat their workers out of well earned raises in lieu
of the rebate money as the rebate period wears on, there will not be
much of a spur to spending.
My inflation thrust index has relaxed in recent weeks, but petrol and
broad commodities markets remain in punishing upturns relative to
The longer run indicators are marginally positive, carried primarily
by the sharp downturn of short rates. However, in terms of
confidence and growth potential, inflation remains the killer.
A stock market that is trying to discount a recovery of output and
profits growth could well struggle if inflation pressures persist.
- 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 !!!