Gary Thayer
Gary Thayer
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It suggests the drag on the economy from the trade deficit in the third quarter will not be as great and could help revise up third-quarter GDP a bit,
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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 data are) suggesting the decline we've seen in the dollar over the last couple of years is not having an impact. It suggests the dollar may still need to fall to help narrow the trade deficit. But there's a risk to higher inflation if it does.
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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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The rise in the employment component, combined with the drop in new jobless claims reported earlier today, suggests that employment conditions remain good at the start of the year.
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Energy prices are dropping, and consumer spending is holding up despite rising unemployment . These are encouraging things the market is recognizing.
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Fewer people are worried about jobs right now, more people think that jobs are easy to get, and I think that's supporting confidence despite the high energy prices.
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There's still a lot more inflation fear than there is inflation. There is still concern that the economy could generate inflation at some point but it still doesn't seem to be doing that. The Fed doesn't need to act more aggressively, but it doesn't mean that they won't.
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Productivity numbers on a quarter-to-quarter basis are very volatile. The downwardly revised second-quarter numbers could easily be revised upward in the third quarter.
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We did see a big recovery in (producer) prices, but that was primarily in energy. Core prices increased only modestly and that's good news for the Fed.
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We had seen the daily and weekly sentiment surveys show a small dip in consumer attitudes at the end of January. Some of that could have been related to the late January rise in energy prices.
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Confidence is up again -- to the highest level in over two years. Consumers are feeling better not only about current conditions, but also about prospects for the future.
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We got good news on inflation. People anticipate that with inflation still very low, the Fed will stay on hold for awhile.
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It does show consumers are in a buying mood,