Suitably Flip

Tuesday Data Jamboree

Unlike yesterday's refreshing paucity of economic news, this morning is chock full o' datapoints, which are off to an inauspicious start.

Consumer Spending Remains Weak: Small Business Optimism Dips Lower in May

The Index of Small Business Optimism fell 0.3 points in May to 90.9. This month marks the third monthly decline in a row. The proximate cause is the fact that 1 in 4 owners still report weak sales as their top business problem.
...
“Corporate profits may be at a record high, but businesses on Main Street are still scraping by,” said NFIB chief economist Bill Dunkelberg. “Washington is throwing misdirected policies at the problem, offering tax breaks for hiring and equipment investment, but acting surprised when they don’t bear any fruit. The failure to understand why small-business owners are not hiring or investing has resulted in a set of policies that have not been very effective, and Main Street is suffering. The icing on the cake: the growing debt, large deficits, threats of higher taxes, regulations being spewed out by state and local administrations, and the uncertainty of the new health care law—is it any wonder that optimism is down?”

The National Federation of Independent Business, which publishes the survey, calls 90.9 a "recession-level reading."

Still to come:

Retail Sales (8:30 am)
Previous: +0.5%
Market expects: -0.7%
Bold prediction: -1.2%

May auto sales will certainly contribute to the decline, given Japanese supply disruptions, and watch for that to be spun heavily.  But even ex-auto, the market is expecting growth to slow from 0.6% to 0.2%.  Expect the auto excuse to prevail even if the ex-auto number is 0.0% or worse.

Wholesale Inflation (8:30 am)
Previous: +0.8%
Market expects: +0.1%
Bold prediction: +0.3%

Core inflation (ex-food and energy) should show far less cooling (expected to tick down from 0.3% to 0.2% and I'd watch for it to stand pat or even tick up a touch).

Business Inventories (10:00 am)
Previous: +1.0%
Market expects: +1.0%
Bold prediction: +1.2%

I'm not actually that confident about this number beating expectations, but I throw down that marker as an excuse to rant about it a little.  While the spin on continued growth will be that it suggests economic expansion, bear in mind that inventory growth outpacing overall GDP growth is a red flag presaging likely slowdown on the horizon.

5 minutes before the 8:30 releases, stock futures are pointing higher by the better part of 1%.  Think they'll hold?

Stay tuned!

Update:

Retail Sales:
-0.2% (vs. -0.7% expected).
Last month's 0.5% increase was revised down to 0.3%.
Ex-auto, sales slowed to 0.3% (vs. 0.2% expected).

Wholesale Inflation:
+0.2% (vs. 0.1% expected).
Core inflation also rose 0.2% (as expected).

Given the market's willingness to cheer neutral news as good, shrug off bad news as neutral, and begrudgingly acknowledge horrible news as bad, I'm a little surprised that this mixed-at-worst* news isn't further boosting stock futures.  The Dow actually pulled back a bit following these two releases.

* "Mixed" versus expectations, that is.  Don't get me wrong.  The data continues to show us unambiguous signs of economic deceleration, which is hardly good (or even neutral) news.  But so far, today's releases have been somewhat less daunting than what investors had braced for (i.e. "Hooray, sales just turned lower but are declining slower than we feared!").  From a long-the-market perspective, that should be (a little bit) good.

Update:

Indeed, now futures are pushing a little higher.

Update:

Business Inventories:
+0.8% (vs. +1.0% expected).
March's 1.0% increase was revised up to 1.3%.

Comments

Tuesday Data Jamboree

Unlike yesterday's refreshing paucity of economic news, this morning is chock full o' datapoints, which are off to an inauspicious start.

Consumer Spending Remains Weak: Small Business Optimism Dips Lower in May

The Index of Small Business Optimism fell 0.3 points in May to 90.9. This month marks the third monthly decline in a row. The proximate cause is the fact that 1 in 4 owners still report weak sales as their top business problem.
...
“Corporate profits may be at a record high, but businesses on Main Street are still scraping by,” said NFIB chief economist Bill Dunkelberg. “Washington is throwing misdirected policies at the problem, offering tax breaks for hiring and equipment investment, but acting surprised when they don’t bear any fruit. The failure to understand why small-business owners are not hiring or investing has resulted in a set of policies that have not been very effective, and Main Street is suffering. The icing on the cake: the growing debt, large deficits, threats of higher taxes, regulations being spewed out by state and local administrations, and the uncertainty of the new health care law—is it any wonder that optimism is down?”

The National Federation of Independent Business, which publishes the survey, calls 90.9 a "recession-level reading."

Still to come:

Retail Sales (8:30 am)
Previous: +0.5%
Market expects: -0.7%
Bold prediction: -1.2%

May auto sales will certainly contribute to the decline, given Japanese supply disruptions, and watch for that to be spun heavily.  But even ex-auto, the market is expecting growth to slow from 0.6% to 0.2%.  Expect the auto excuse to prevail even if the ex-auto number is 0.0% or worse.

Wholesale Inflation (8:30 am)
Previous: +0.8%
Market expects: +0.1%
Bold prediction: +0.3%

Core inflation (ex-food and energy) should show far less cooling (expected to tick down from 0.3% to 0.2% and I'd watch for it to stand pat or even tick up a touch).

Business Inventories (10:00 am)
Previous: +1.0%
Market expects: +1.0%
Bold prediction: +1.2%

I'm not actually that confident about this number beating expectations, but I throw down that marker as an excuse to rant about it a little.  While the spin on continued growth will be that it suggests economic expansion, bear in mind that inventory growth outpacing overall GDP growth is a red flag presaging likely slowdown on the horizon.

5 minutes before the 8:30 releases, stock futures are pointing higher by the better part of 1%.  Think they'll hold?

Stay tuned!

Update:

Retail Sales:
-0.2% (vs. -0.7% expected).
Last month's 0.5% increase was revised down to 0.3%.
Ex-auto, sales slowed to 0.3% (vs. 0.2% expected).

Wholesale Inflation:
+0.2% (vs. 0.1% expected).
Core inflation also rose 0.2% (as expected).

Given the market's willingness to cheer neutral news as good, shrug off bad news as neutral, and begrudgingly acknowledge horrible news as bad, I'm a little surprised that this mixed-at-worst* news isn't further boosting stock futures.  The Dow actually pulled back a bit following these two releases.

* "Mixed" versus expectations, that is.  Don't get me wrong.  The data continues to show us unambiguous signs of economic deceleration, which is hardly good (or even neutral) news.  But so far, today's releases have been somewhat less daunting than what investors had braced for (i.e. "Hooray, sales just turned lower but are declining slower than we feared!").  From a long-the-market perspective, that should be (a little bit) good.

Update:

Indeed, now futures are pushing a little higher.

Update:

Business Inventories:
+0.8% (vs. +1.0% expected).
March's 1.0% increase was revised up to 1.3%.