Industrial production is out, 0.4% m/m vs. 0.2% consensus.
Figure 1: Nonfarm payroll employment, NFP (dark blue), Bloomberg consensus of 4/3 (blue +), civilian employment (orange), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), consumption in Ch.2012$ (light blue), and monthly GDP in Ch.2012$ (pink), GDP (blue bars), all log normalized to 2021M11=0. Q3 Source: BLS, Federal Reserve, BEA 2022Q4 3rd release via FRED, S&P Global/IHS Markit (nee Macroeconomic Advisers) (4/3/2023 release), and author’s calculations.
Thanks. Any thoughts on the divergence between the FOMC effective rate and Tbills? 1 mo T bills are yielding something like 50bpts less than the FOMC rate. Curious as to your thoughts as to whether this is bank stress, a forecast of an impending cut, debt ceiling/issuance related, or something else entirely.
Here are both 1-month and 3-month bill yields, minus the Fed funds rate:
Both are more volatile since early 2022 than at any time since the Great Recession. Note that the 3-month/funds spread is positive and has been rising. Expectation of rate cuts would likely drive 3-month yields down more than 1-month yields. So it’s probably not rate cut expectations which have driven down 1-month yields.
https://fred.stlouisfed.org/graph/?g=12w4r
Note also that the 1-month/funds spread has routinely turned negative through the period of rate hikes, typically when the Fed hike rates.
Just a guess, but the on-the-run bill rate doesn’t change in response to expected rate cuts, but the funds rate does. The bill rate is set according to the cost of funds over the entire maturity of the bill. So when the Fed hikes, the spread contracts, but widens back out when a new bill becomes the on-the-run.
The debt ceiling and other factors absolutely matter in the bill market, but the big, regular wobbles are largely a reflection of rate hike and bill issuance schedules, I suspect.
m2 is 21 trillion!
who can get near 4% from a bank?
Well duh! What is nominal GDP? And I guess you are as clueless as to the current level of “velocity” (GDP/M2) as the rest of the worthless trolls here.
Real manufacturing and trade sales – for February – won’t be updated for two more weeks, but in the meantime, we do have some preliminary indications.
Real retail sales, which are about 1/3 of the total, declined 1% in March, the 2nd decline in a row. YoY real retail sales are down 1.9%. Since the 1950s, there have only been two months with YoY declines that low without the economy being in recession.
Nominally, manufacturers sales, wholesalers sales, and total business sales all peaked last June, and netted out to flat in the February report this morning. BUT, the producer price deflators that will be used to arrive at the “real” number declined so sharply in February that real manufacturing and trade sales for the month will probably increase again to a new high.
Total sales are above potential trend going back to 2019. While hiring per person has not kept up with total sales. There explains your mistake.
Mistake? What mistake, pray tell?
Not to turn optimistic, but today’s retail sales figures aren’t bad. Retail sales figures are not inflation-adjusted, and are mostly goods. Goods inflation has been cooling, durable goods, energy and food prices falling.
I’m not able to find a “goods” CPI and I’m too lazy to cook one up from durable and non-durable goods CPI series. But here’s the thing – retail sales grew more strongly in Q1 (5.4%) than Q4 (1.7%) without inflation adjustment. Toss in a drop in durables prices in Q1 (-0.8%) and modest non-durables price gains (0.4%) in and it ain’t a bad picture.
https://fred.stlouisfed.org/graph/?g=12vOe
Another interesting bit of detail, aside from the price-driven weakness in gasoline sales, is that sales categories which often involve borrowed money (vehicles, appliance and electronics, building materials) are down, while categories which often don’t involve borrowing (restaurant, health and personal care, department stores) are in pretty good shape.
All of which is probably the reason GDPNow marked up consumption’s contribution to Q1 GDP in today’s tally:
https://www.atlantafed.org/cqer/research/gdpnow?panel=3
Yup, retail sales are going to look “ugly” until June and probably off until October(oer) while total sales corrects back to precrisis trend. All part of the disinflation process.