Daily update
Daily update
- Yesterday’s US GDP data showed stronger growth, although inventory numbers hint at some slowing ahead. Inflation continues to moderate. Can the Federal Reserve claim credit for this? It cannot. Central banks slow inflation by weakening credit and demand. This is not what has happened in the US. Inflation was always going to slow, and US economic performance seems to have happened in spite of the Fed, not because of it.
- Voters are unlikely to be sitting at home saying: “Well, an abstract number that is bound to be wrong came in better than expected, so clearly we are living in the best of all possible worlds”. The politics of economics depends on perception, not reality. Perceptions have been hurt by consumers’ inaccurate views of inflation.
- December US personal income, spending, and deflator numbers are somewhat pre-empted by yesterday’s quarterly figures. Personal spending is still important, as it captures the shift to spending on fun (which retail sales does not). Income data is also significant, as people work “side hustles” and increasing numbers hold more than one job.
- Yesterday’s European Central Bank press conference did nothing surprising. Vague hints of summer rate cuts were made, as expected. Lagarde made one statement I clearly agree with.