Jim Welsh's Contributions

Prior to an FOMC meeting the Federal Reserve’s staff compiles the ‘Beige Book’ for FOMC members. Each of the 12 Federal Reserve districts contacts businesses within their district for an assessment of the economy and gathers economic data pertinent to that district. That information is sent to...

In June the Headline CPI declined by -0.1% led by declines in Gasoline (-3.9%), Oil (-3.8%), Airline Fares (-5.7%), and a moderation in Shelter inflation from an increase of 0.4% in May to 0.2% in June. The decline in Shelter inflation brought monthly Core down to 0.1% from 0.2% in June. On a...

Services comprise 80% of GDP so changes in the level of growth in services will determine when and how much the economy slows. One month doesn’t make a trend but it can offer a clue. In June the ISM Services Index declined from 53.8 in May to 48.8 in June a rather large drop in one month....

Wall Street has been impatiently waiting for better inflation news and the May Personal Consumption Expenditures Index (PCE) delivered. The Core PCE only increased by 0.08% and the Headline was essentially flat (-0.01%). The takeaway values from May 2023 were 0.1% and 0.30% so Headline annual...

The expert and you are in a car and the expert is driving. After awhile, you notice that the expert is driving the car by looking through the rearview mirror. Concerned you ask him why he’s not looking ahead as he drives. He replies...

Flamingo’s can stand on one leg for a long time but the stock market can only manage that feat until there is a reason to sell. An absence of selling pressure and a positive fundamental narrative can stretch the market’s ability to stand on one leg. However, there are an increasing number of...

In the June 3 WTR I thought the Summary of Economic Projections for GDP, Unemployment Rate, and PCE inflation wouldn’t change much and that the yearend target rate for the Funds rate would be increased from the March SEP’s 4.6% “The FOMC updates its Summary of Economic Projections (SEP) every 3...

The headline proclaimed that 272,000 jobs were created in May which was 50% higher than the forecast gain of 180,000. Wages grew 0.4% in May and were up 4.1% from last year. The increase in the Unemployment Rate from 3.9% to 4.0% was easily dismissed in the face of stronger job growth. A look...

The second estimate for first quarter GDP was revised down from 1.6% to 1.3%. As in the first report GDP was held down by an increase in imports (-0.9%) and decrease in inventories (-0.5%). As I’ve discussed imports reflect demand that is satisfied by production overseas, which is why it is...

Wall Street has been obsessed with guessing when the FOMC will lower the Funds rate for the first time and the number of times in 2024. It’s been an instructive process. In December many on Wall Street forecast the FOMC would make the first rate cut at the March...

Many FOMC members have given speeches or interviews since the last FOMC meeting and the message has been fairly uniform. Paraphrasing: ‘ We’re not ready to cut the Funds rate until we have more confidence inflation will return to 2.0%, nor do we think there will be a need to increase the Funds...

In last week’s WTR I reviewed why the April CPI was expected to show a decline in annual inflation and spur rallies in the S&P 500, Gold, Treasury bond prices, and a decline in the Dollar.

Wall Street is convinced that the economy will strengthen in the second half of 2024 and enable earnings to grow by more than 10% in 2024. The increase in confidence is doubling interesting since recent data has consistently been weaker than forecast.

The Citi Economic Surprise Index (...

The FOMC meeting and Chair Powell’s press conference overshadowed economic data last week. Going into the FOMC meeting Wall Street was concerned that after 3 months of not good inflation data the FOMC might consider a rate hike, rather than numerous cuts in 2024. The idea that the FOMC would...

In the April Macro Tides I reviewed previous statements Chair Powell had made in speeches and during his post FOMC meeting press conferences and highlighted the emphasis he placed on the importance of confidence. “In speeches, testimony before Congress,...

GDP growth slowed in the first quarter to 1.6% down from 2.4% in the fourth quarter and a strong 4.9% in the third quarter. On the surface it looked like the economy had decelerated far more than expectations, but a closer look revealed that inventories (-0.3%) and imports (-0.9%) suppressed...

In the second half of 2023 the correlation with the Federal Funds Rate futures (blue line inverted to align with changes in the S&P 500) and the S&P 500 was high. The S&P 500 bottomed in October as the prospect for rate cuts increased (blue line). The S&P 500 marched higher in...

As I discussed in the April Macro Tides and last week’s WTR, the March CPI was expected to move the financial markets. “ The Consumer Prices Index (CPI) for March will be announced on Wednesday and the Producer Prices Index (PPI) on Thursday. The CPI and PPI were up in January and February, so...

The Labor Department reported an increase of 303,000 jobs in March which was well above the Wall Street’s estimate of 200,000. Other aspects of the report were improved with the average work week ticking up to 34.4 hours from 34.3, and the Unemployment Rate falling to 3.8% from 3.9% in February...