DAILY UPDATE (March 22nd to 25th): February Home Sales Jumped 11.8% in the Month, Declined 1.8% (-1.8%) Year-to-Year / FOMC Held Rates in Check as Expected, Yet Stocks and U.S. Dollar Sold Off and Precious Metals and Oil Prices Rallied in Response / Those Early Trends Should Intensify as Economic Data Continue to Weaken / Freight Activity in Deepening Year-to-Year Decline, Signaled Still-Weaker Retail Sales, Industrial Production and GDP; Looks Like the Onset of a New Recession

• Next Postings of the SHADOWSTATS COMMENTARY and BULLET EDITION: Special Commentary No. 983-B the “Review” will follow over this weekend (likely March 25th). Bullet Edition No. 5 should post April 1st, reviewing economic releases (Mar 26 to 29): Housing Starts (Feb), Trade Deficit (Jan), Industrial Production (Annual Benchmark), “Final” 4q2018 GDP and New-Home Sales. Targeted posting dates are subject to change; actual postings are advised to Subscribers by coincident e-mails.

• Next Posting of SHADOWSTATS CONCURRENT ANALYSIS OF NEW ECONOMIC DATA (Tuesday, March 26th): February 2019 Housing Starts (Census Bureau, 8:30 am ET). ShadowStats analysis should be posted by 10:30 am ET. ShadowStats analyses usually post within two-to-three hours of a given headline release.

• LATEST ECONOMIC RELEASES/DEVELOPMENTS. February 2019 Existing-Home Sales Growth Jumped 11.8% in the Month, Declined 1.8% (-1.8%) Year-to-Year, as reported March 22nd by the National Association of Realtors (see details and press release at www.nar.realtor under research/housing statistics). Following a string of sharp declines, and on top of a small downside revision to January activity, February New-Home Sales rebounded by 11.8%, the strongest monthly gain in more than three years. That said, sales were down year-to-year by 1.8% (-1.8%), continuing in a deepening 12-month annual downtrend. This remains the highest-quality indicator available of Home Sales activity.

(Mar 20) FOMC Meeting held the targeted Federal Funds Rate in the 2.25% to 2.50% range (no more rate hikes expected this year), downgraded its near-term economic forecasts and slowed its pace of balance sheet liquidation, generally as expected by the financial markets (see Bullet Edition No. 4, to be expanded upon in pending No. 983-B). The ShadowStats general outlook has not changed: deepening economic downturn, intensifying easing pressures on the Fed, mounting downside pressures on the U.S. stock market and dollar, and upside pressures on oil, gold and silver prices.

(Mar 18) Growth in February 2019 CASS Freight Index™ (www.CassInfo.com) declined year-to-year for the third straight month down at a deepening annual pace of 2.09% (-2.09%). The smoothed 12-month-moving average for the Index, neutralizes seasonality in this unadjusted series, and it also declined for the third month, turning sharply lower in February. Declining/slowing freight activity has not been seen like this since first-quarter 2015, the onset of an unofficial recession for broad economic series such as Industrial Production, Manufacturing and New Orders for Durable Goods (see Bullet Editions No. 3 and No. 4). The index did signal slowing fourth-quarter 2018 activity and a downturn in first-quarter 2019 activity. ShadowStats regularly follows and analyzes the CASS Index as a high-quality coincident/leading indicator of underlying economic reality.

(Mar 15) Growth in February 2019 Industrial Production and Its Dominant Manufacturing Sector (Federal Reserve Board [FRB] Came in Below Expectations, on Top of Downside Revisions. Consistent with ShadowStats expectations of a pending downside revision to Fourth-Quarter 2018 GDP quarterly growth on March 28th, and an outright quarterly contraction in headline First-Quarter 2019 GDP, both Industrial Production (IIP) and Manufacturing (76% of production), showed weaker, revised fourth-quarter growth, and an early (two-month) trend for first-quarter contraction. The monthly February Production gain was 0.1%, following a revised decline of 0.4% (-0.4%) [previously 0.6% (-0.6%)] in January, while Manufacturing declined by 0.4% (-0.4%), versus a revised decline of 0.5% (-0.5%) [previously down by 0.9% (-0.9%) in January. [See extended analysis of Industrial Production and the economy in Bullet Edition No. 3]

The good news in production remained with Oil and Gas in the Mining Sector, which gained 0.3% in the month, versus a revised 0.3% [previously 0.1%] in January, with an uptrending first quarter. The Mining Sector (14% of production) fourth-quarter growth slowed minimally. Utilities (10% of production) pushed aggregate IIP to the plus side, rising by a random, weather-battered 3.7%, versus a downwardly revised 0.9% (-0.9%) [previously a 0.41% gain] in January.

(Mar 14) January 2019 Construction Spending (Census) Continued in Collapse, Despite a Gimmicked Headline Jump in January. As has become an all-too-common circumstance, monthly gains in headline spending are positive only due to major downside revisions to the prior month’s activity. The 1.3% headline January “gain” was a decline of 1.0% (-1.0%) before the downside revision to December, on top of a downside revision to November activity. With annualized real fourth-quarter 2018 sales down now at revised 11.5% (-11.5%) [previously 7.4% (-7.4)], the Mar 14 reporting indicated a likely downside revision to Fourth-Quarter 2018 GDP, along with an early trend for a First-Quarter 2019 contraction. Deteriorating weakness and downside revisions were seen heavily in the Residential Sector, with some January pickup in the Nonresidential Sector, particularly in Public Construction Spending.

(Mar 12) February 2019 Consumer Price Index (BLS) unadjusted annual CPI-U inflation slowed to a 28-month low of 1.5% (1.52% at the second decimal point), versus 1.6% (1.55%) in January 2019. Yet, in tandem with the still-dominant gasoline/energy prices, the seasonally adjusted February CPI rose by 0.2% (0.17%) in the month, its first gain since October 2018. The monthly CPI-U had held “unchanged” at 0.0% November 2018 through January 2019, respectively down by 0.01% (-0.01%) in November and December 2018 and by 0.02% (-0.02%) in January 2019.

The February 2019 ShadowStats Alternate CPI (1980 Base) held steady year-to-year, at 9.2% for the second month, down from 9.6% in December 2018. See the Alternate Data tab.

• Not Updated - RENEWED DOWNTURN IN ECONOMIC ACTIVITY, TROUBLED MARKETS AHEAD: Pending Commentary No. 983-B (the Review) will assess broad economic and financial-market conditions, including the nature and actions of the Federal Reserve and the ultimate sovereign-solvency issues facing the U.S. Treasury. The Outlook Sections here will be updated fully after the posting of the Review. Again, the general outlook has not changed.

The Review estimates that headline 1q2019 GDP is on track for an annualized real quarterly contraction, marking the onset of formal recession. The Federal Reserve’s excessive interest rate hikes and tightening, particularly December 2017 and after, triggered the pending recession, not the government shutdown, which only exacerbated the circumstance. Recent shifting FOMC-policy language suggests something of a GDP downturn also is in the Fed’s internal forecasts [See No. 983-A, and Bullet No. 3].

Markets: Softening Shift in Fed Language Increasingly Should Hit the U.S. Dollar and Boost Precious Metals. The U.S. Stock Market and the U.S. Dollar face further heavy selling, likely in the very near future, reflective of the weakening economy that has triggered softening policy language from Fed officials and the FOMC, with a temporary shelving of further rate hikes. While stocks have had a mixed rally in response, that likely will not continue long-term, against an offsetting and intensifying rally in Gold Prices and flight from the U.S. Dollar. Trends lower in the stock market and the U.S. dollar should become dominant, along with rallying precious metals price, as flight capital (both domestic and foreign) increasingly seeks higher rates and safety outside of dollar and related U.S. assets. The circumstance is exacerbated by the extraordinary collapse of and deterioration in political civility in Washington.

Commentaries No. 982 (Jan 7), No. 981 (Jan 3) and No. 980a (Dec 26) reviewed some key conditions behind recent heavy selling/buying of U.S. equities and related, underlying economic conditions. See also ShadowStats ALERT (No. 973 of Oct 14), which was updated and reviewed in Hyperinflation Watch No. 4, Special Commentary No. 983-A and remains in play today (see pending No. 983-B. [No. 973 (and earlier) is open to the public, click on “Archives” at the bottom of the left-hand column, then on December 2018 for access.]

• ALTERNATE DATA TAB provides latest ShadowStats Alternate Estimates of Unemployment, Inflation, GDP, Money Supply, including the ShadowStats M3 estimate and the Financial-Weighted U.S. Dollar.