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Mixed Data Ahead of the Fed - September 25, 2018

It’s once again time for all eyes of the financial world to be on the Fed as they meet today and tomorrow to deliberate over the state of the economy and decide how best to fulfill their mandate. As with July’s meeting, Members of the FOMC are walking into their meeting with mixed data across the economy. Here’s a quick cheat sheet on the economic data that has come in over the past week:

THE GOOD

Philadelphia Fed Business Outlook data came in ahead of expectations, with both shipments and new orders improving. At the same time, inventories decreased and employment increased. Price pressures reduced, as price acceleration decreased for both prices paid and prices received.

Jobless Claims were lower than expected. Initial Jobless Claims were not only below expectations, and decreased month on month, but they were also the lowest since November 15, 1969, a nearly 50-year low. Continuing Claims also beat expectations and dropped month over month.

The Conference Board’s Consumer Confidence numbers came in well ahead of expectations. Though the Present Situation Index improved only “marginally”, the short-term outlook improved significantly as more respondents anticipated better conditions and fewer expected conditions to worsen. Consumer’s employment outlook was, however, mixed, with an increase in the number of respondents expecting more jobs in the coming six months, but fewer expecting an improvement in their income.

Finally, on the good side of the ledger, the Richmond Fed Manufacturing Index rose significantly, with increased new orders and shipments. Employment, like the Philadelphia Feds data, was down, though the index remained positive. And respondents anticipated an improvement in margins, expecting the growth of prices paid to slow while prices received accelerate.

THE BAD/MIXED

Broadly, housing appears to be showing some strain. While MBA Mortgage Applications were up and Housing Starts improved significantly, month on month, Building Permits were down, and Existing Home Sales were flat. The  20-City Composite Case-Shiller Home Price Index also saw a slightly smaller YoY gain than previous months. While this is a change in the rate of change, it bears watching. Several articles, as we’ve discussed in previous TFTDs, have highlighted affordability as the largest potential pitfall for the housing market.

The recent Markit Flash PMI data was also mixed, with Services declining while Manufacturing accelerated and the Composite taking a dip. Chief Business Economist Chris Williamson did offer some solace, and blamed the recent storms, saying it was “no surprise to see some disappointing survey data” He went on to optimistically say, “Growth may well pick up again as we move into the fourth quarter.”

Last, on the mixed side, was the Dallas Fed’s Manufacturing Survey. Though still registering expansion, the production, new orders, growth rate of orders, capacity utilization, and shipment indexes all slowed.