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Economic Data Becoming Less Reliable to Investors

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By    |   Tuesday, 02 April 2019 10:36 AM

Orders for durable goods, especially orders for long-lasting factory goods fell in February after three straight months of growth due to a sharp decline in civilian aircraft orders.

Growth in overall durable-goods orders for January was revised down to a 0.1 percent increase from a previous estimate of 0.3 percent. Through the first two months of 2019, durable-goods orders were up 4.4 percent year-over-year.

The proxy for corporate investment, new orders for nondefense capital goods excluding aircraft, declined 0.1 percent in February after rising a revised 0.9 percent in January and was up 2.6 percent in the first two months of this year compared with the same period in 2018, which can be seen in table 1 in the Census Bureau report, which is of course good news.

It is relatively well-known that economic data have become less reliable in recent years. Structural changes in economies are not well captured by old-fashioned statistical methods. Not many people fill in surveys these days and big data might help in the future, but it’s not really comprehensive enough yet to help with macroeconomics.

So, this means that it is still a good idea to pay attention to “revisions” to data. Identifying the “trends” in data is generally a better way to go.

That said, the recent data flow taken globally is showing signs of some growth stabilization. Trade tariffs or taxes may still weigh on growth as companies delay purchases as they wait for trade tariffs or taxes to be lifted.

But even allowing for that, global trade does appear to be improving somewhat.

The Dollar Index is up a little bit at 97.3760

As information for the readers of this article, the Dollar index or DXY, which is often referred to as a basket of the important U.S. trade partners' currencies, is for an important instrument used to “Hedge” risk in the currency markets or for example to take a position in the Dollar without having the risk exposure of a single currency pair.

The Euro area gave us today its producer price inflation (PPI) data for February that rose 0.1 percent month-on-month, which was down from 0.3 percent in January. Year-on-year, the PPI was up 3.0 percent, which remains good and tells us that we are not heading for disaster in the Euro area in the near term.

The PPI is a decent indicator of pricing power by companies, better than consumer price inflation (CPI) is.

Pricing power is one of the key factors to focus on this year as costs are clearly rising for companies at the moment. If pricing power remains constraint then it will be profit margins that will have to bear the brunt of these rising costs.

Meanwhile, in the interminably tedious process of the UK-EU divorce, “nothing” has been decided yesterday. Of course, nothing has been decided. Nothing can ever be decided. We are in a Mobius loop* of endless discussions about things the UK electorate have long since given up caring about.     

(*The Mobius loop is the unfamiliar name of a very familiar symbol: a triangle composed of three arrows looping back on themselves in clockwise direction.)

Parliament having rejected “all” of the options that were put to it yesterday, the UK Cabinet now meets for five hours today. What the UK Cabinet** meeting can accomplish in five hours or less, “goodness only knows”.

(** The UK Cabinet is the collective decision-making body of the UK’s government that is composed of the Prime Minister and 21 cabinet ministers, the most senior of the government ministers.)

“Nothing” would be a reasonable bet.

The normal so-called unnamed officials suggesting that the UK Cabinet will have to consider a lengthy delay to the whole process, which would mean the UK participating in the European Parliamentary elections that take place from May 23 to May 26, the BBC reported.

By the way, the UK government is already making legal moves to allow that to happen.

The UK Parliament will have another chance to get something agreed on Wednesday. The government has already had three chances to get its views across.

UK politics does not operate a “Three strikes and you’re out” rule that is a baseball analogy.

In the UK, the better analogy is “test cricket,” which is the longest form of the sport of cricket with matches that last forever but with occasional pauses for tea.

The British pound is currently down more than half of a percent at around USD $1.30

Beware. A “no-deal” Brexit could send the British pound significantly lower.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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It is relatively well-known that economic data have become less reliable in recent years. Structural changes in economies are not well captured by old-fashioned statistical methods.
economic, data, reliable, investors
Tuesday, 02 April 2019 10:36 AM
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