Economic Data Fits Puzzle Pieces Together

Wednesday, May 31st, 2017

More economic data has hit the tape this week ahead of this Friday’s big BLS non-farm payroll report. After today’s opening bell, we expect to get new reports on Pending Home Sales and the latest Beige Book. Yesterday after the bell we also saw some valuable information that may come into play, especially with regard to interest rates and the Federal Open Market Committee (FOMC), of which a decision will be realized mid-June.

Consumer Confidence was down for the second month in a row, though off multi-year highs in March. Two months ago, Consumer Confidence was the highest in 16 years at 124.9; in April this dialed back to 119.4 and yesterday’s May number fell to 117.9. Clearly this is a down-trend, but from very favorable highs, so concerns regarding this do not appear to register at this stage.

Confidence in the present is up, while future consumer sentiment is on the wane slightly. This has likely to do with questions regarding policy, including whether or not tax cuts might be forthcoming to the U.S. consumer this year.

On the other hand, the State Street Investor Confidence Index was also released yesterday, and results surprised to the upside: the 102.5 read in May, well ahead of the 97.4 estimate. North America accounts for the biggest boost in sentiment, cranking up 9 points from 95.1 to 104.1. Investors in Europe also raised, albeit more slightly, whereas investor sentiment fell a bit, likely a result of a continually cooling Chinese economy.

Federal Reserve Governor Lael Brainard, known as a dovish official regarding domestic economic policy, spoke yesterday. She gave a generally positive account of the U.S. economy, although she did express concerns that expected inflation rates toward the FOMC’s target of 2% seem to be lagging.

What this means is that Brainard may be expressing a lesser likelihood of Fed presidents going forward to raise interest rates two weeks from now. That said, Brainard did say she is interested in the Fed reducing its bond portfolio “before too long,” which is understood to only take place once interest rates grow to a higher level than currently.

Finally, President Trump has made headlines in threatening to pull out of the Paris accord on climate change, another signature accomplishment of the Obama administration. Aside from how this may affect green energy companies at home and abroad and global climate change in general, it also points to increased tensions between the United States at its long-time allies, especially Germany.

Pulling out of this agreement may have implications for things like trade with other countries, looking forward. This is worth keeping an eye on.

Mark Vickery
Senior Editor

Questions or comments about this article and/or its author? Click here>>