Gary Thayer
Gary Thayer
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Inflation is creeping up, but it's not out of hand. I think that's pretty important. The bond market may have discounted a worst-case scenario over the last couple of months on inflation, and now maybe traders won't have to worry about the Fed moving too fast.
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It looks like the economy is stabilizing after the hurricane-related stresses and we're heading into the holidays with an upturn in confidence that is encouraging and bodes well for the good consumer spending over the next month or so.
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If you put the two months together it still looks as if retail sales were strong at the beginning of the year -- an average increase of 0.8 percent for each of the two months.
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We probably won't see good (employment) numbers in the next couple of months because of the loss of jobs in the Gulf Coast region,
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We've seen, over the past seven months or so, orders stabilize or improve slightly, compared to a big decline last year. Orders are rising relative to inventories, and that's a positive sign for capital spending.
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It's still a good reading overall, but not quite as robust as we've seen in the last several months. The encouraging thing is that the employment component increased again. We are beginning to see businesses becoming a little more willing to hire.
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It's sort of a good news-bad news situation though, because if it gets out of hand, it can create other problems for the economy.
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The big number is the employment number on Friday. If that number comes in weak for the third consecutive month, views on the Fed are likely to change significantly.
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The bond market liked the inflation data. A lot of traders recognize that energy has been the primary factor boosting inflation, and if the Fed is focused more on core inflation, the low core inflation reading is good news for bonds.
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The bond market had been thinking that the weak economic numbers that we've seen would cause the Fed to think twice about raising rates,
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These numbers show the economy is indeed in recession, and they leave the door open for the Fed to cut rates again.
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These numbers look as if there's no urgent need to raise interest rates much further.
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These numbers are slightly dated, but they show that the inventory liquidation period is over, and that (the) drag on the economy is probably behind us.
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It's not a big drop. It's reflecting the fact that the economy has improved this year, but not enough that consumers are convinced things are sufficiently better.