The Beat Goes On…

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We’ve seen some “sloppy” U.S. data in recent months, starting with December retail sales and heading on to January industrial and manufacturing production. There are reasonable excuses for the downbeat retail report, including the government shutdown, an increase in part-time employment and the now infamous polar vortex. One sparrow does not make a spring, but then there were the industrial production data, where the 0.6% drop in the headline reading was driven by a 0.9% drop in the manufacturing sector. While some blamed the drop on the auto sector, ex-auto manufacturing was down 0.2%.

The combination of these data seemingly supports the Federal Reserve’s current stance, which is essentially, “Do no harm.” With German GDP at zero in Q4 and China stumbling, is the U.S. following suit or the victim of unusual circumstances? The good news on that front is that the February Empire State Manufacturing Survey, the University of Michigan (UM) Index of Consumer Sentiment and Index of Consumer Expectations all exceeded analyst projections. In fact, UM Expectations hit 86.2 in February versus 79.9 in January. A key to come will be the February PMI data, which could provide a clearer indication of the economy’s direction.

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