Survey Says... Ignore The Hard Data At Your Peril

Tyler Durden's picture

Authored by Michael Pento via,

Surveys of both consumers and businesses show there is an extreme level of confidence regarding future GDP growth. Consumer confidence is now at its highest level since 2001. Small and medium-sized business owners, the driving force of growth in the economy, appear downright giddy; as the NFIB Small Business Optimism Index recently soared to its highest level since 2004.

The Philly Fed Index, a survey that gauges how well manufacturers are feeling, hit its highest level since 1984. Business leaders are betting on tax cuts, infrastructure spending and a scale-back of onerous regulations that will, hopefully, make America great again!

But just as we were beginning to get tired of all this “winning”, investors are also receiving a strong reality check from the actual hard data regarding the current state of economic activity.

The economy slowed more than expected in the fourth quarter of 2016. Gross domestic product increased at a lackluster 1.9 percent annual rate at the end of last year. For all of 2016, the economy grew only 1.6 percent, which was the weakest pace since 2011.

And despite all the good feelings about the current state of affairs, the Atlanta Fed’s GDPNow model, is forecasting real GDP growth (at a seasonally adjusted annual rate) in the first quarter of 2017 to come in at a pitiful 0.9 percent.

The hype regarding the potential implementation of Trumponomics appears to be creating a trenchant gap between today’s economic reality and hope about the future.

More evidence of this gap can be found in the January Durable Goods Report, which met expectations at 1.8 percent. However, excluding aircraft, transportation equipment fell 0.2 percent, well below the estimate of a 0.2 percent gain. Core capital goods showed a 0.4 percent decline in orders. This ends 3 months of strength for this reading and dispels the hope for a first quarter business investment boom suggested by the business confidence readings.  Unfilled orders were down 0.4 percent and have now fallen in 7 of the last 8 months--the deepest contraction since the Great Recession.

And we may need to start working on that wall right away if investors are to believe that confidence surveys will catch up with reality. Construction spending fell a sharp 1.0 percent in January. The consensus was for construction spending to increase 0.6 percent.

Personal spending increased only 0.2 percent in January, one-tenth below the consensus. This brings into question whether upbeat consumers are putting their money where their mouths are. Inflation-adjusted spending fell 0.3 percent, the largest drop since September 2009.

Also, Industrial Production for the month of February registered a big fat zero percent growth rate.

And how do you explain the recent drop in the CRB Index?  An economy that is rapidly expanding should see a rise in commodity prices. However, in the week of March 6th; oil price dropped 8%, copper dropped 3.3%, and iron ore dropped 5%. This key growth index is down about 7% since the start of the year and has lost over a third of its value since 2014.

In addition, the latest data on department store and retail sales is alarming. Retail sales increased by just 0.1% in February, which was the smallest gain in the past 6 months. And Zerohedge reported that Bank of America data shows February department store sales fell about 15% yoy—the largest drop on record.

Yet despite any real evidence of actual economic growth, we have a stock market trading at all-time highs and a Fed that is determined to slam the brakes on “runaway” 0.9% growth.  The Republicans in congress are in a battle with Democrats and Libertarians over raising the debt ceiling; and they can’t seem to get out of their own way on health care and tax reform.

Hopefully, these employment and survey anecdotes are leading economic indicators that will turn out to have foreshadowed a leg up in GDP growth. Or, they could end up being the fleeting hiccups of hope in the new President that will end up sinking in the mire of D.C. politics. If the latter case proves to be correct, survey anecdotes will soon reconcile with the persistent anemic path of a sub-par and grossly-injured economy that has been beset by asset bubbles and debt.

The stock market has priced in perfection coming from the new Administration. Unless the Donald can put some tax and regulatory meat on the bones very soon, the stock market should suffer a huge fall.

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Bill of Rights's picture

You mean ignore the data from the same people who blame it on the weather ... that data?

Liquid_Silver's picture

I missed the boat, I missed many boats when I pay attention to the hard data for the last 6 years...... so now what? 

Bill of Rights's picture

Wait for the next dip in the NAS then buy with both hands ...

LawsofPhysics's picture

Forward soviet, into the abyss!

No turning back now, global Weimar is on bitchez...

hedge accordingly

FreeShitter's picture

Just a measily 300T in global debt.

TheRideNeverEnds's picture

What's a few hundred trillion between friends?

Are we running out of electrons to conjure up more ones and zeros in the computers?

We will have a problem once the debt reaches a Googolplexian. The problem being there is not yet a name for a larger number. I'm sure we will figure something out when that time comes.

NobodyNowhere's picture

Earlier, for years, you could say that the Feds had an interest to keep the stawk market going.  There was little else.

Now, even that fake conviction is gone - the Fed may have been directed to crash it on Trumps head.

It's all chaos now.

Tread (and trade) accordingly.

LawsofPhysics's picture

All stimulus is fungible eventually...

hundreds of trillions in  digital/paper claims have been created.  They are starting to seek out real assets.

The Fed cannot do jack shit now, yet they continue to transfer wealth to their owners anyway....

fuck em, they will make good fertillizer soon enough.

Goldilocks's picture

Michael Pento-Stock Market Will Fall at Least 50% (25:11)
Greg Hunter - Mar 18, 2017

LawsofPhysics's picture

LOL!!!  Optimist.  True price discover will never return.  Bombs will fall all over the world first. Michael is talking his book.

weezer's picture

He's been saying the same thing for 5 years now...

Sudden Debt's picture

Today I went to the market. It was a beautifull day and it was like 4 weeks since I went there. It helps me relax.


But while my wife was ordering stuff, I noticed the prices.

fish is 26 euro's a kilo, most hams and other meats are 20 to 27 euro's a kilo, fruits have doubled....

These prices are getting way out of control! Is anybody really keeping track?

cherry picker's picture

It is getting pricey all over for food.

I live in a small town in the country.  There are not many jobs that pay more than minimum and a lot are part time.  How anyone can afford to eat, pay rent, never mind escalating heating bills, gasoline for vehicles, insurances etc.

I have a funny feeling it will all come to a head soon.  I also think this is part of the anger on immigration issues.  There isn't enough to go around for many people, never mind looking after people whose lands are being laid waste by constant warfare and bombing.

Something is not good out there, no matter what kind of a picture some people want to paint.

Too many of us controlled by too few and no place left to go.  In the old days, fed up Europeans could take a chance and go to the free new world, but that is filling up fast.

Deplorable's picture

I can see 3 more rate hikes in those graphs

malek's picture

Me too, I just cannot identify the time frame

ljm81's picture

Fuck the hard data the hole systems broke andnonsensical.. yet still people look to indicators and ask why lolol