With this week's January updates on consumer inflation and residential building permits, three more indicators fall into place for last month's estimates of The Capital Spectator Economic Trend and Momentum indices (CS-ETI and CS-EMI, respectively). In all three cases, the additions land on the side of growth, providing more statistical support for assuming that January 2013 is likely to remain recession-free in the month's final edit for NBER's macro history book.
Earlier this week, I updated the January profile for CS-ETI and CS-ETI and the overall trend continued to show a bias for growth. But the analysis was based on an incomplete data set. With three more data points to consider, the data set is missing fewer pieces and so the January profile looks a bit more persuasive.
Here's a brief tour of the latest data updates:
Real retail sales decelerated last month, rising just 0.1% over December. The year-over-year rate, however, reflected a more encouraging 2.8% gain. That's about average for the annual rate posted in each month over the past year.
Meanwhile, the year-over-year change in the real monetary base (M0) accelerated in January, advancing 2.2% vs. a 0.3% annual gain through December. In fact, last month's increase in M0 vs. the year-earlier level is the highest annual rate of growth since last April.
Newly issued building permits continued to trend higher in January, rising 1.8% over December. On a year-over-year basis, permits increased 35% through this year's first month, or near the fastest pace since the recession ended.
The remaining unknowns for the January inputs for CS-ETI and CS-EMI are real personal income and spending, and real manufacturing and trade sales. Considering the preponderance of growth for the numbers published so far, however, it's getting easier to assume that the January read on the economy will remain positive once the final updates are in.
February and beyond, of course, are a mystery. Questions about the impact from the automatic federal budget cuts scheduled to begin next month threaten to slow economic growth. Considering the modest rate of expansion, some analysts say the odds will increase that the business cycle will slip over to the dark side if Congress doesn't intervene to soften the blow from the forced spending reductions. If the relatively upbeat January profile gives way in the months ahead, we'll see the deterioration in the data.