The lion's share of U.S. economic data remains in negative territory. Whether it's industrial production, capital expenditure, or factory orders, these data sets are putting up their worst non-recessionary declines ever.
And yet the Fed appears hellbent on raising rates before the New Year. Look at their comments from the past week.
- New York Fed Bill Dudley: “We’re at a point where the economic expansion has plenty of room to run.”
- Boston Fed head Eric Rosengren: (He wanted to raise rates at the Fed's September policy meeting) said yesterday the market's 70% probability of a hike in December "probably is a reasonable beat."
- Federal Reserve Vice Chair, Stanley Fischer: "Low rates may threaten financial stability.” in a speech yesterday.
- Latest Fed minutes: Markets should expect a rate hike "relatively soon" because “job gains have been solid,” “growth of economic activity has picked up,” and “household spending has been growing strongly.”
As a "crazy-as-it-may-sound" reminder, our omnipotent central planners have gone back and forth on its rate hike rhetoric 7 times in just the last 10 months.
- Hawkish (December 2015)
- Dovish (March 2016)
- Hawkish (May 2016)
- Dovish (June 2016)
- Hawkish (August 2016)
- Dovish (September 2016)
- Hawkish (October 2016)
Back to economic reality...
As you can see in today’s Chart of The Day below, US Capital Goods Orders (Capex) data has been terrible.
"US Capital Goods Orders (Capex) have been negative for 19 going on 20 of the last 21 months," Hedgeye CEO Keith McCullough writes in today's Early Look. "Like Industrial Production, at -3.1% year-over-year, Capex remains in its worst non-recession run of negative growth ever."
Furthermore, as we've noted before: Job growth slowing + Aggregate hours worked slowing + Productivity slowing = GDP slowing
All told, we 100% disagree with the Fed's economic assessment. Don't be lulled into their complacency.
