Fedspeak

The head of the Atlanta Fed, Dennis Lockhart, is  quoted in the NY Times as saying:

"The slowness in the first quarter obviously raises concerns that we’re going to see a continuing or persistent slowdown, but that’s not my base case view. My base case view is that we’ll see a rebound in the second and third quarter and beyond and that we’ll stay on the basic track that has been our story, our narrative here, for the last year or more. And that is a 2.5 percent to 3 percent growth rate with continuing improvement on the employment front, and gradual rise in inflation toward the 2 percent target. So to some extent I’m taking on a Wilbur Mills position: That’s my story and I’m sticking to it."

So the "story" is that we were in a short term tough patch this past quarter but will bounce back this quarter and next to a 2.5-3% growth rate. Yep, that's his story and he's sticking to it.  I like this guy.  At least when he is telling you what he knows to be a "story" he flat out tells you he is telling you a "story" and does not feign that it is reality like most the Fedspeaks do.  His "story" is proven just that by the Atlanta Fed GDP Now site that is putting GDP forecast for the year at .1%.  As I have noted recently, that is a drop of nearly 2% in the forecast in two months, which is huge.

Now compare this to the Fedspeak from John Williams, head of the Fed in San Francisco, as quoted in the Wall Street Journal:

"'Things are looking better–in fact, they’re looking downright good,' the official said in a speech to be delivered to an audience in Sydney and Melbourne via video.
Given how much the economy has improved and is likely to continue to gain ground, “I think that by mid-year it will be the time to have a discussion about starting to raise rates,” Mr. Williams said.
The strength of the U.S. dollar against a “broad index” of currencies is not an impediment to the U.S. economy reaching real GDP growth of 2.5% this year, he said.
“The U.S. economy has good momentum…even with what is a rather large appreciation of the U.S. dollar,” Mr. Williams said."

So this guy really seems to be buying his own "story" or, as they say, drinking his own Kool-Aid.  The problem with this Kool-Aid, however, is they drink it and we are the ones that suffer.

For more on some of the other Fedspeak, here is link to a nice article that discusses the less than spectacular employment data out today, which includes a worthy collection of recent Fed quotes on the economy, including those I noted above.

http://economistsview.typepad.com/economistsview/2015/04/fed-watch-air-pocket.html

Add to this some former Fed Fedspeak from Bernanke's new blog on how the Fed does not create bubbles or distort markets, and you will have a nice laugh for the weekend.

http://globaleconomicanalysis.blogspot.com/2015/04/thrown-under-bus-another-look-at-self.html

These guys (and gals) really crack me up. 

Would You Like That GDP on Flat Bread

Well, we are officially at ground zero.  The Atlanta Fed at its GDP Now site has today lowered its GDP forecast for Q1 for the U.S.  On February 2, the 2015 forecast stood at a respectable 1.9%.  The economic reports in the two months since have led to a steady decline and today they lowered the forecast to zero, zip, nada, nix, nothing, zilch, zippo, goose egg, naught, nil, nuttin' honey.  Apparently they did not like the ISM Manufacturing Index numbers out today, which still showed some growth at 51.5%, but a good bit lower than February at 52.9%:


http://www.ism.ws/ismreport/mfgrob.cfm


Any number over 50% shows more companies growing than shrinking, so we are just barely there.  Now this month was less than February and February was less than January and January was less than December and . . . well, you get the picture.  Lowest number for this index in almost two years and . . . I must be reading this wrong . . . apparently it was "well short of Wall Street's forecast."


http://www.marketwatch.com/story/ism-manufacturing-index-falls-in-march-to-lowest-rate-since-may-2013-2015-04-01


Oh dear.  Oh dear, oh dear, oh dear.  Wall Street forecasts were overly optimistic - really?  I'm shocked, shocked to find that forecasts have gone wrong here. If you cannot trust Wall Street, who can you trust.  At least the ISM index number has got to be reliable as it is based on a survey of manufacturing executives and they would never fib about how well business is doing.  Yes, you can take those numbers to the bank - though I would avoid taking them to Greek banks at the moment.

P.S.

The above was originally posted by me yesterday. Today, 4/2/15, the Atlanta Fed reversed course a bit and raised the Q1 GDP forecast back to .1%.  Not huge, but an increase nonetheless.  The reason for it is a tad curious in my book.  It is tied to a foreign trade report that came out this morning.  The report showed a nice decrease in our trade deficit, which is viewed as a good thing, but both exports and imports were down from January.  It is just that the decrease in imports, which went down $10.2 billion, exceeded the decrease in exports, which only went down $3.0 billion.  Thus, the deficit was less.  So the question I have to ask is whether decreases in both export and import activity are a good sign for the economy?  Doesn't this reflect that we are both buying less from others and selling less to others?  Am I missing something?  Obviously I am missing a lot, but that is another discussion.


http://globaleconomicanalysis.blogspot.com/2015/04/trade-deficit-shrinks-first-quarter-gdp_2.html

Lot's of Company

I just posted the other day about the EU not surviving in its current form.  Not an uncommon thought these days.  Even the head of PIMCO agrees:


http://globaleconomicanalysis.blogspot.com/2015/03/can-eurozone-survive-not-in-its-current.html