Clouded Outlook

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Special Guest Blogger: Tim Kearney

Several factors may cloud the economic outlook in the first quarter. As would be expected, the full impact of the coronavirus is unknown. In the past week the International Olympic Committee proclaimed that the games will be held in Tokyo this summer; reassuring, but there is nearly a half year until the games begin. Unusually warm winter weather has pushed down utility output, which hits the industrial production (IP) report and retail sales. More important for IP is the fallout from the Boeing 737 Max problem, the production of which is an important part of business equipment spending.

The best signal to follow will continue to be events in the labor market, though that market remains a coincident rather than a leading indicator. The jobs front, and basically across-the-board improvements in the January purchasing mangers’ indexes, are telling a positive story for the first quarter; just how positive, we may not be able to tell until the clouds lift a bit.

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