We didn't really need a confirmation that the economy was deteriorating and completely disconnected from the "market", but we got it nonetheless. First, Initial Claims coming at 360K, on expectations of 330K, the worst print and worst miss in six weeks, confirming that weekly data is largely noise and that there is no sustainable downward trend. The May 11 weekly print adjusted and unadjusted were 360K and 318K respectively, virtually unchanged from a year ago at 373K and 325K, showing that in one year there has been essentially no progress, and that weekly initial claims of 350K is the new normal. Of course, the last week's print was also revised higher from 323K to 328K, while initial claims also missed expectations of a round 3MM print, instead printing at 3009K.
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The second negative economic number came from Housing Starts, which plummeted from a downward revised 1021K to just 853K, well below expectations of 970K, the biggest miss since January 2007 and validating the data we have shown previously in the collapse of lumber prices. So much for the "that" recovery too. The silver lining - the "no capital requiring" housing permits which rose from 890K to 1017K, which as all hedge funds know, is the easiest way to game interest in the system.
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Finally, confirming that the Fed's transmission channels are completely broken, and yet paradoxically giving Bernanke even more green light to continue building up future inflation and more QE, was CPI data, which declined from -0.2% to -0.4% in April, the worst MoM drop since December 2008 despite the monetary pumpathon from the Fed and BoJ. This is the second monthly miss in a row (and fifth of the last six). The YoY figures also misses +1.7% relative to a 1.8% expectation (ex Food and Energy) - also the lowest print since June 2011, although not very unexpected in light of the previously reported weak PPI data.. Much of the driver for this drop MoM and YoY are from a 4.3% drop in Energy prices MoM. That said, CPI would have been +0.1% if it was not for gasoline. Of course the bad is good mantra is in full swing as lower inflationary prints are providing ammunition for doves to push for more QE to defend their inflation goal. We wonder just how quickly oil prices will snap back once chatter of a taper is dismissed.
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