Economic updates reveal a mixed bag of indicators recently. Here’s a summary of the latest developments:
- Dallas Fed manufacturing survey plummets to levels reminiscent of the recession era | MarketWatch
- Most Americans remain optimistic about their personal finances | Gallup
- The East Coast blizzard could inflict damages of up to $3 billion | CNNMoney
- Global markets and the dollar decline as oil sell-off continues | Reuters
- Despite low prices, the US oil production boom remains intact | CNNMoney
- 6 critical elements that will influence oil prices in 2016 | OilPrice.com
Last week, several major asset classes experienced a notable rebound, as indicated by various representative ETFs. However, the recovery was insufficient to erase the losses incurred over the past year. As of January 22, it marks the second consecutive week in which all major asset classes are demonstrating varying degrees of decline in total returns over the preceding 12 months.
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Here are more economic insights:
- Chicago Fed National Activity Index shows US growth remains below average | 24/7 Wall St
- US Manufacturing PMI rebounds in January, driven by an uptick in new orders | Markit
- US home resales saw a significant bounce-back in December from a 19-month low | Reuters
- US Leading Index declines in December yet still projects moderate growth | Bloomberg
- German Ifo index reflects business sentiment at nearly a one-year low in January | MarketWatch
- Oil prices dropped 3% on Monday due to concerns about rising oversupply | Reuters
● The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse
By Mohamed El-Erian
Review via The Economist
In this insightful work, Mohamed El-Erian, who previously served as an economist at the IMF and held a position at the Pimco fund management group, categorically highlights the deficiencies of current central bank strategies. Although he acknowledges the role of central banks in alleviating significant human distress, he insists that they have not succeeded in delivering the essential “high, durable, and inclusive growth” alongside “true financial stability” that Western economies require.
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Recent data from the Chicago Fed National Activity Index indicates a continued slowdown in US economic growth as of December. The three-month average of the index (CFNAI-MA3) fell to -0.24, marking the third straight month of below-trend growth and the lowest reading since March of the previous year.
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The possibility of a Fed rate hike amidst escalating economic concerns has become a topic of discussion. Some analysts suggest that the central bank may need to reconsider the recent 25-basis-point rate increase, the first since 2006. However, the effective Fed funds rate (EFF) currently stands at 0.37% as of January 20—the highest it has been in a month—illustrating a lack of signals for an immediate retreat. This becomes an intriguing focal point in light of the upcoming Fed meeting.
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Recent reports indicate an uptick in US jobless claims, reaching a seven-month high, deviating from the historic lows observed until recently | MarketWatch
A more optimistic outlook on economic expectations has emerged among Americans for January | Bloomberg
The Philly Fed manufacturing index slightly outperformed expectations but remains negative | Sharecast
Markit Flash Eurozone PMI suggests cooling growth at the start of 2016 | Markit
ECB’s Draghi reassured markets with hints of increased stimulus measures | CNN
Stock and oil markets rebounded on Friday following Draghi’s dovish stance, easing global fears | Reuters
Cheaper oil appears to have a minimal impact on the US economy this time around | NY Times
Concerns about an impending downturn are growing amidst fluctuating statistics | Bloomberg
The upcoming December update of the Chicago Fed National Activity Index (CFNAI) is anticipated to show a slight improvement based on various econometric forecasts. The expected projection of -0.13 represents a modest enhancement from the previous month, signifying that US economic activity remains moderately below historical growth trends. According to the Chicago Fed guidelines, only values below -0.70 suggest an increased probability of an economic recession starting.
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Another set of disappointing economic news has emerged from the labor market. According to the Labor Department, initial jobless claims rose unexpectedly by 10,000 last week, reaching a seasonally adjusted total of 293,000. While this number is still low historically, it deviated from economists’ expectations of a slight decline. New filings for unemployment benefits have hit the highest level since July. On a brighter note, claims have been decreasing year over year, albeit at a slowing rate, reflecting only a 2.7% drop compared to the previous year—its smallest decline since December.
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Recently, market sentiment has shifted negatively. The ongoing decline in stock and oil prices, coupled with an increase in junk bond yields relative to Treasuries, is raising significant concerns regarding the resilience of the US economy. Despite the Treasury yield curve maintaining a positive slope—which traditionally indicates growth—some analysts suggest that this key indicator is currently less reliable due to the extraordinary measures taken by monetary policy in recent years.
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