Weekly Economic Release Summary - Soft Economic Growth Continues

US Census says manufacturing new orders declined month-over-month. According to the seasonally adjusted data, it was civilian aircraft which caused the decline. The data in this series is noisy, so I would rely on the unadjusted three-month rolling averages which declined.

Remember the headline numbers are not inflation adjusted, and this month's inflation-adjusted year-over-year numbers are in contraction. The rolling averages year-over-year growth remains in positive territory.

The Conference Board's Employment Trends Index, which forecasts employment for the next six months declined with the authors saying:

After growing rapidly through most of 2017 and 2018, the Employment Trends Index has been fluctuating around a flat trend in recent months, suggesting that employment growth will continue, but at a slower rate through the summer. Particularly concerning was the decline in the number of workers employed by the Temporary-Help Industry, an important leading indicator and component of the ETI, which declined by one percent in the past three months. The main trends in the US labor market - including growing employment and labor force participation, tightening labor markets and accelerating wages - are likely to continue in 2019, but more modestly.

Econintersect evaluates the year-over-year change of this index (which is different than the headline view), as we do with our own employment index. The year-over-year index growth rate decelerated by 1.2% month-over-month and grew 3.1 % year-over-year. The Econintersect employment index likewise declined a similar amount.

The predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings was down relative to last month.

This usually indicates a slowing in the rate of growth of employment.

Note that the indices discussed are the last release of that index.

Overall the coincident indices are indicating 1Q2019 growth similar to the GDP growth in 4Q2018.

• The Philly Fed US Coincident index year-over-year rate of growth marginally declined, but the index remains near average for values seen over the last two years.

• The Aruoba-Diebold-Scotti business conditions show average business conditions.

• The rate of growth of the Conference Board Coincident Index is stable with little change in the rate of growth.

• ECRI's Coincident Index's rate of growth declined and remains below average for the values seen in the last 12 months.

• The CFNAI rate of growth is below the historical trend rate of growth (zero-line), and its growth rate is slowing.

According to the IMF:

... new World Economic Outlook (WEO) projects a slowdown in growth in 2019 for 70 percent of the world economy. Global growth softened to 3.6 percent in 2018 and is projected to decline further to 3.3 percent in 2019. The downward revision in the growth of 0.2 percentage points for 2019 from the January projection is also broad-based. It reflects negative revisions for several major economies including the euro area, Latin America, the United States, the United Kingdom, Canada, and Australia.

After the weak start, growth is projected to pick up in the second half of 2019. This pickup is supported by significant monetary policy accommodation by major economies, made possible by the absence of inflationary pressures despite growing at near potential.

According to the BLS, the Consumer Price Index (CPI-U), year-over-year inflation rate was 1.9 % year-over-year (higher than the reported 1.5% last month). The year-over-year core inflation (excludes energy and food) rate moderated from 2.1% to 2.0% and is at the target set by the Federal Reserve.

Energy's increase was the main reason inflation advanced. Medical cost inflation grew to 2.3 % year-over-year.

Year-over-Year Change CPI-U Index to CPI Core Inflation

I suggest everyone read these minutes - they have not been cookies cutter minutes (having little real change between meetings) since the departure of Chair Janet Yellen.

I find it interesting that the markets only seem to care about the federal funds rate, which these minutes indicate that the federal funds rate will remain unchanged as long as the participants' economic forecasts come true. Hey boys and girls, the FOMC views are all over the place, and its complete miss-forecasts of inflation going back well over 10 years tell you that the FOMC is unable to quantify inflation pressures:

Participants noted that the latest readings on overall inflation had been somewhat softer than expected. However, participants observed that these readings largely reflected the effects of earlier declines in crude oil prices and that core inflation remained near 2 percent. Most participants, while seeing inflation pressures as muted, expected the overall rate of inflation to firm somewhat and to be at or near the Committee's longer-run objective of 2 percent over the next few years. Many participants indicated that, while inflation had been close to 2 percent last year, it was noteworthy that it had not shown greater signs of firming in response to strong labor market conditions and rising nominal wage growth, as well as to the short-term upward pressure on prices arising from tariff increases. Low rates of price increases in sectors of the economy that were not cyclically sensitive were cited by a couple of participants as one reason for the recent easing in inflation. A few participants observed that the pickup in productivity growth last year was a welcome development helping to bolster potential output and damp inflationary pressures.

In their discussion of indicators of inflation expectations, participants noted that market-based measures of inflation compensation had risen modestly over the intermeeting period, although they remained low. A couple of participants stressed that recent readings on survey measures of inflation expectations were also still at low levels. Several participants suggested that longer-term inflation expectations could be at levels somewhat below those consistent with the Committee's 2 percent inflation objective and that this might make it more difficult to achieve that objective on a sustained basis.

The Producer Price Index year-over-year inflation increased from 1.9 % to 2.2 %. Energy prices were the major reason for the increase, but core inflation (less energy and food) decreased.

Year-over-year import prices and export prices grew insignificantly.

The month-over-month price index for fuel imports increased (and non-fuel imports contracted), and the price index for agricultural exports decreased.

Import Oil prices were up 7.3% month-over-month, and export agricultural prices were down 2.3%.

• With import prices unchanged year-over-year; and
• export prices up 0.6% year-over-year.

NFIB Small Business Optimism - according to the NFIB:

The NFIB Small Business Optimism Index increased 0.1 points to 101.8 in March, a historically strong level and an indication that small businesses continue to power the economy after being briefly shaken by January's government shutdown. Overall, the Index anticipates solid growth, keeping the economy at "full employment" with no signs of a recession in the near term. The Uncertainty Index dropped six points to 79, returning to a more normal level for recent years.

Rail so far in 2019 has changed from a reflection of a strong economic engine to contraction. Currently, not only are the economic intuitive components of rail in contraction, but also the year-to-date has slipped into contraction.