Tuesday, May 17, 2016

Good news and bad news in this morning's data

 - by New Deal democrat

We got two pieces of good news and two pieces of bad news this morning.

Let's start with the good news:  Industrial production jumped +0.7% - only the 4th monthly increase in 18 months (blue in the graph below).  While mining continued to decline, manufacturing (red) increased to tie its January record:

Again, adding to the evidence that the shallow industrial recession is bottoming out.

The second piece of good news is that real retail sales, and real retail sales per capita set new records:  

Since this is a leading indicator, it eases the concern that a recession might happen this year.

Now the bad news.  Consumer inflation ran "hot" in April, with owner's equivalent rent continuing to be the most important driver, although energy prices and medical device prices were an important assist:

Along the same lines, while housing permits and starts increased, they are still below last spring's post-recession highs, even excluding the northeast region (blue below) that includes the NYC distort ions from last spring:

While single family house permits came in only 2,000 below their December post-recession high, multi-unit housing continued to tank. Also, the February new high in single family permits was revised away:

There is a crying need for starter homes, but why should builders build them when there is so much more money in all-cash sales of high-end houses to well-off Chinese buyers?

So, two takeaways from this morning's data:

1.  Immediate recession risk is receding.  

2. There is absolutely zero reason for the Fed to raise rates in the inflation number, unless punishing prospective young American homebuyers is their objective.