With a hurricane in some of the numbers, this was not a good week for US economic data, in sequential (month-over-month) rate of change terms. Both US Retail Sales and Industrial Production Growth decelerated to +3.2% and +1.5%, year-over-year, respectively (see y/y IP growth in the chart below – it’s been a great run).
Expectedly, Utilities Production (i.e. hurricane related electricity production decline w/ power out) headlines the backslide, dropping -5.4% month-over-month and -7.8% year-over-year … a dynamic that will persist next month. Favorable cycle compares through November should continue to support positive – albeit off recent rate of change peak – growth in the face of the distortions.
Our predictive tracking algo for US GDP ticks down to +2.42% year-over-year and +3.63% on a q/q SAAR basis, post these prints.
Prelim Univ of Michigan for Sept = 1st reading that absorbs the cumulative impact of Charlottesville, Debt Ceiling/Other Political Discord and Hurricane. While the headline dipped -1.5pts on a fall in Expectations, the “Current Conditions” and “Current Financial Position” subindices (again) made new, higher cycle highs. 1Y/5Y Forward inflation expectations tick higher also.
People care about their living reality and what impacts them tangibly on the day-to-day. Exogenous events and the ebb and flow of social mood matter but mostly as an amplifier or after they hit a critical treshold (i.e. they are nonlinear). Proximate economic conditions remain principal.