Economic Reports Scorecard – 11/6/15 to 11/20/15

The incoming economic reports ran two to one negative over the last two weeks, continuing the trend we’ve seen all year. That’s one of the worst two week stretches we’ve seen all year. Janet Yellen has been telling us for over a year that changes in policy were “data dependent” but that is hard to square with, well, the data. The only data from the last two weeks that supports the idea the economy is improving is the housing data. Ironically, the improved housing data may be a product of the anticipation of the rate hike the Fed just executed. With a year of preparation and warning, it seems likely that some home sales were pulled forward to avoid higher mortgage rates. Yes, the change in rates is miniscule but if you know the hike is coming and you know you are going to be buying a house don’t you at least try to move ahead of the Fed? I would certainly think so. Of course, that doesn’t mean that you won’t continue to see that effect as more rate hikes are anticipated but how long can that go on before you’ve sucked forward so much of the future that there isn’t much more to borrow? And, just to think out loud here for a moment, what happens if future rate hikes start looking iffy? What happens if economic growth continues to disappoint?

What is most disconcerting about the recent data is that the parts of the economy that have been performing well are starting to look a little worse for wear. The manufacturing side of the economy is now widely agreed to be in recession but the automobile industry has been going gangbusters. The most recent retail sales report though showed better results when auto are excluded. In fact, vehicle sales are down for two consecutive months now and that is more than a little worrisome. With inventories across the economy already high and manufacturing already contracting, about the last thing we need now is for auto sales to start slowing. Will the Fed’s rate hike have any impact on auto sales? Just asking.