If all you did today was pull up the mainstream media's interpretation of recently reported economic data, you'd probably make some poor investment decisions. All-important measures of Retail Sales (a proxy for current state of the U.S. consumer) and Industrial Production, were misleadingly labelled as "sluggish" or in "steep decline."
That's simply not correct.
Here's a brief summary from CNBC and USA Today:
- CNBC: "U.S. industrial production fell 0.4% in November, a bigger drop than anticipated, due to a steep decline in utility output and a dip in manufacturing, data from the Federal Reserve showed on Wednesday."
- USA Today: "Retail sales slowed significantly in November after surging the previous month, raising questions about the strength of the holiday shopping season and consumer spending in the fourth quarter."
This "analysis" misses the mark on many levels.
For starters, Wall Street likes to measure sequential (or month-over-month) changes in economic data. But this completely misconstrues the longer-term trend. The year-over-year change in the data is what you want to watch.
Viewed through this lens, here's a more constructive interpretation of today's Retail Sales and Industrial Production data:
- On a year-over-year basis, the rate of change in Industrial Production came in at -0.6%. This was up from the prior month's reading of -0.8% and marked the 15th straight month of contraction in the data set. But Industrial Production numbers have been steadily improving since the bottom of -2.3% in December 2015.
- Retail Sales have also been improving. Since hitting +2.2% year-over-year growth in August, Retail sales have been up +3.3% in September, +4.2% in October and +3.8% in November, a good proxy for the strength of U.S. Consumer (which makes up 70% of the U.S. economy) and supportive of our U.S. #GrowthAccelerating thesis.
Note the stark contrast between our interpretation and what's reported on CNBC and USA Today. "In rate of change terms, when something goes from awful/recessionary, to less awful, that's good," wrote Hedgeye CEO Keith McCullough earlier today.
This statement may seem intuitive, even self-evident. It is. But that's not how Wall Street and financial media outlets do macro. Stick with what works.
