Flash Update
FLASH UPDATE - May 12, 2007
JOHN WILLIAMS' SHADOW GOVERNMENT STATISTICS
FLASH UPDATE
May 12, 2007
__________
Annual M3 Growth Accelerates to 12.8%
Retail Sales and Trade Deficit Take Hits, as PPI Booms.
__________
Money supply data for the full month of April, including the SGS Ongoing M3 measure, have been posted to the Alternate Data Series tab at www.shadowstats.com. -- Best wishes to all, John Williams
Fed Hints at Inflationary Recession
Comments from the U.S. central bank usually are couched in such cautious and careful language as to make a Wall Street attorney blush. Removing the regular platitudes as to likely economic expansion and inflation moderation in the coming quarters, the crux of the May 9th FOMC statement went: "Economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing. ... the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected." That is as close as the Fed will get to acknowledging a recessionary inflation, until well after the fact of broad market recognition. Last week's economic reporting further moved market expectations towards the unthinkable combination of a contracting economy beset by high inflation.
Growth Falters Anew. Seasonally-adjusted April retail sales contracted 0.2% (a 0.1% gain net of revisions) +/- 0.7% for the month, following a 1.0% (previously 0.7%) gain in March. With annual growth slowing to 3.2% in April from a revised 4.4% (previously 3.8%), and with annual CPI-U inflation at 2.8% in March, annual inflation and retail sales growth easily could cross in the next month or two. Such would mean not only an ongoing real (inflation-adjusted) monthly retail sales contraction, but also the annual contraction in real retail sales usually seen in deepening economic downturns.
The seasonally-adjusted March trade deficit widened to $63.9 billion from a revised $57.9 billion (was $58.4 billion) in February. The March number reflected some catch up from recent underreporting of oil prices and oil imports. While the monthly shortfall still was well shy of reality, it was enough worse than expectations to place downside pressure on the upcoming "preliminary" estimate revision of first-quarter GDP growth. First-quarter GDP growth was reported initially at 1.3%.
Inflation Outlook Intensifies. Depressed again by seasonal adjustments, the seasonally-adjusted producer price index (PPI) for April finished goods rose by a monthly 0.7% (1.0% unadjusted). March PPI was up 1.0% (1.4% unadjusted). Seasonally adjusted and annualized for the last three months of change, PPI inflation is running at a 12.7% pace. Still, those Wall Street hypesters who never saw a core-inflation rate they didn't like, described the current inflation as moderate and contained. Annual PPI inflation held at 3.2% for the month.
With full data in for April, the monthly average SGS Ongoing M3 was up 12.8% year-to-year, showing a sharp acceleration in growth from March's 11.7% pace, as discussed in the last newsletter. The best estimate of the seasonally-adjusted monthly average level is $11.790 trillion (first estimated as $11.798 trillion based on three weeks worth of data), up from $11.610 trillion in March.
Once again, even though the reported numbers approximate the seasonally-adjusted monthly-average M3 levels, subscribers are cautioned against using the monthly levels for month-to-month comparisons. The data are estimated using seasonally-adjusted components, as published and adjusted by the Fed, wherever possible, but there also are modeled numbers (albeit of reasonably small magnitude) included in the monthly totals. The monthly level estimates best are used for comparison with other dollar levels, such as GDP ($13.633 trillion in nominal terms for the first quarter), or in calculating year-to-year change. Year-to-year measures tend to bypass any issues related to seasonal adjustments and month-to-month change.
As one subscriber suggested, you can calculate the annualized month-to-month change for April and find that it topped 20%, or that the rate of growth for the last three months of M3 annualized out at over 16%. While these numbers tend to confirm a pattern of rapidly accelerating growth, my confidence in the adjusted monthly change is not high enough to use that precise number, raised to the 12th power, as a headline. In fairness, though, I was never that comfortable with the same seasonally-adjusted measures when the Federal Reserve published them. I am quite comfortable, however, with the estimates of SGS Ongoing M3 year-to-year rates of change.
Upcoming Week. Market expectations for the monthly April CPI-U (Tuesday, May 15th) are around 0.5%. Reporting risk generally is to the upside of expectations, given underlying reality, but the BLS has to be under heavy pressure to bring in a below-consensus number, particularly for the "core" rate that appears to be anticipated at about 0.2%.
Further details will follow in the newsletter.
___________________________________________
May's "Shadow Government Statistics" monthly newsletter should be during the week of May 28th. An e-mail advice of same will be sent.
FLASH UPDATE
May 12, 2007
__________
Annual M3 Growth Accelerates to 12.8%
Retail Sales and Trade Deficit Take Hits, as PPI Booms.
__________
Money supply data for the full month of April, including the SGS Ongoing M3 measure, have been posted to the Alternate Data Series tab at www.shadowstats.com. -- Best wishes to all, John Williams
Comments from the U.S. central bank usually are couched in such cautious and careful language as to make a Wall Street attorney blush. Removing the regular platitudes as to likely economic expansion and inflation moderation in the coming quarters, the crux of the May 9th FOMC statement went: "Economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing. ... the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected." That is as close as the Fed will get to acknowledging a recessionary inflation, until well after the fact of broad market recognition. Last week's economic reporting further moved market expectations towards the unthinkable combination of a contracting economy beset by high inflation.
Growth Falters Anew. Seasonally-adjusted April retail sales contracted 0.2% (a 0.1% gain net of revisions) +/- 0.7% for the month, following a 1.0% (previously 0.7%) gain in March. With annual growth slowing to 3.2% in April from a revised 4.4% (previously 3.8%), and with annual CPI-U inflation at 2.8% in March, annual inflation and retail sales growth easily could cross in the next month or two. Such would mean not only an ongoing real (inflation-adjusted) monthly retail sales contraction, but also the annual contraction in real retail sales usually seen in deepening economic downturns.
The seasonally-adjusted March trade deficit widened to $63.9 billion from a revised $57.9 billion (was $58.4 billion) in February. The March number reflected some catch up from recent underreporting of oil prices and oil imports. While the monthly shortfall still was well shy of reality, it was enough worse than expectations to place downside pressure on the upcoming "preliminary" estimate revision of first-quarter GDP growth. First-quarter GDP growth was reported initially at 1.3%.
Inflation Outlook Intensifies. Depressed again by seasonal adjustments, the seasonally-adjusted producer price index (PPI) for April finished goods rose by a monthly 0.7% (1.0% unadjusted). March PPI was up 1.0% (1.4% unadjusted). Seasonally adjusted and annualized for the last three months of change, PPI inflation is running at a 12.7% pace. Still, those Wall Street hypesters who never saw a core-inflation rate they didn't like, described the current inflation as moderate and contained. Annual PPI inflation held at 3.2% for the month.
With full data in for April, the monthly average SGS Ongoing M3 was up 12.8% year-to-year, showing a sharp acceleration in growth from March's 11.7% pace, as discussed in the last newsletter. The best estimate of the seasonally-adjusted monthly average level is $11.790 trillion (first estimated as $11.798 trillion based on three weeks worth of data), up from $11.610 trillion in March.
Once again, even though the reported numbers approximate the seasonally-adjusted monthly-average M3 levels, subscribers are cautioned against using the monthly levels for month-to-month comparisons. The data are estimated using seasonally-adjusted components, as published and adjusted by the Fed, wherever possible, but there also are modeled numbers (albeit of reasonably small magnitude) included in the monthly totals. The monthly level estimates best are used for comparison with other dollar levels, such as GDP ($13.633 trillion in nominal terms for the first quarter), or in calculating year-to-year change. Year-to-year measures tend to bypass any issues related to seasonal adjustments and month-to-month change.
As one subscriber suggested, you can calculate the annualized month-to-month change for April and find that it topped 20%, or that the rate of growth for the last three months of M3 annualized out at over 16%. While these numbers tend to confirm a pattern of rapidly accelerating growth, my confidence in the adjusted monthly change is not high enough to use that precise number, raised to the 12th power, as a headline. In fairness, though, I was never that comfortable with the same seasonally-adjusted measures when the Federal Reserve published them. I am quite comfortable, however, with the estimates of SGS Ongoing M3 year-to-year rates of change.
Upcoming Week. Market expectations for the monthly April CPI-U (Tuesday, May 15th) are around 0.5%. Reporting risk generally is to the upside of expectations, given underlying reality, but the BLS has to be under heavy pressure to bring in a below-consensus number, particularly for the "core" rate that appears to be anticipated at about 0.2%.
Further details will follow in the newsletter.
May's "Shadow Government Statistics" monthly newsletter should be during the week of May 28th. An e-mail advice of same will be sent.