If the economic news so far this week has been mixed, I'll venture that today tipped the needle to the positive side of the dial. I can do no better than to steal the reaction of occasional macroblogger Mike Bryan:
...the personal income, spending, and price numbers were all quite favorable. Income growth was strong and broadly-based, spending was solid, and the price numbers were well contained. While these numbers are reported as "in line with expectations" they actually were softer than implied by the CPI report released a few days ago (i.e. the "up 0.2 percent" expected as actually a 0.157 increase, on the low side of that expectation.)
Also released today... was the ISM report for February. These numbers suggest that factory activity is gaining more strength. The index beat market expectations and, at 56.7, it suggests pretty good growth here. Here are the details: Orders great, production great, employment very good, inventories falling and the orders backlog rising. Yep, the purchasing managers also said that prices were still rising at an accelerated pace.
And also out today are the construction numbers for January. These numbers, up a mere 0.2 percent, and the details confirm the residential sales numbers out earlier by indicating that most of the softening in January was in residential building (nonresidential looked much better.) It's a little hard to know how much of the January slowing in residential construction is a statistical payback for the unusually strong December report. Still, given the great weather during the month, these construction numbers have to be a disappointment to the forecasters.
The Federal Open Market Committee is expected to increase its overnight lending rate to 4.75% in four weeks, and many analysts say that it’s possible that adds another rate hike in May or June.
... but MarketWatch found some analysts with a bit more conviction:
"We judge the ISM survey, along with other data for the first quarter which we believe point to real GDP growth in the neighborhood of 5% in Q1, as being consistent with further rate hikes at the March, May and June FOMC meetings," said the economist team at Bear Stearns.
Well, thanks to the ever-energetic Erkin Sahinoz, cranking away from his outpost in Turkey, we have the very first vintages of the Carlson-Craig-Melick estimates of fed funds probabilities for the June meeting:
As far as a third rate hike (following March and May) goes, I'd say the market is more with the "it's possible" group -- for now.
UPDATE: Kash looks at the latest housing price data and joins slowing but not crashing club. Barry Ritholtz boils it all down to fundamentals. The Capital Spectator finds someone willing to claim the housing boom is over. (Michael Shedlock has a Florida-centric version of the boom is over theme.) Calculated Risk takes the mortgage application angle on the housing market theme (and doesn't, I think, find much action).
The Nattering Naybob sees the ISM report and says "economic slack is thin and the potential for additional inflation abounds." The personal income and spending report prompts this: " A continued pullback in spending would grind the economy to a halt and increase economic slack. This could occur latently while the Fed continues to raise due to energy pass through and Gulf reconstruction efforts." It's all bad, I guess. And for his part, Kash is not ecstatic about the personal income figures. But The Skeptical Speculator is with me: "On the whole, the economic data is coming in strong..."
UPDATE II: The Capital Spectator thinks the demise of consumption spending is greatly exaggerated.