Read what you like into the numbers, but some carry more weight than others....

Tuesday 2nd June 2015

Read what you like into the numbers, but some carry more weight than others....

 "Growth too slow for rate rise, says Boston Fed chief" , The Financial Times, p.7

  and

"Dollar extends rise as positive data feeds US expectations of a rebound" , The Financial Times, Global Overview, p.31

Just about every day a slew of economic information is released by official bodies across the globe. It's hard enough to keep up with all the data, never mind to weigh the importance of one particular number against another and assess its likely effect on markets. Analysts will look to the data to confirm the direction of the economy but until that direction becomes clear it is remarkable how differently data can be interpreted. Mention it quietly, but traders are not beyond drawing attention to news items that coincide with their view whilst ignoring those that don't. Ultimately, much of the time the data can be contradictory and it's up to individuals to make their choices.

Take today's two articles..... The first reports the president of the Boston Fed Eric Rosengren taking Friday's big downward revision of US Q1 GDP to  - 0.7% as evidence that the economy is still spluttering and consequently any rate rise in the near future would be entirely inappropriate. Mr Rosengren is an acknowledged dove and does not carry a vote in the Fed's policy-making panel, the Federal Open Market Committee (FOMC). But he does attend its meetings and represents one side of the difficult debate the Fed is currently facing. The article goes on to say that his fears were justified by yesterday's news that consumer spending remained unchanged when it was expected to show a rise of 0.2%, and this despite a jump in incomes of 0.4%.

 Plainly, as the Global Overview tells us, the market took a different view on things : the GDP revision is a function of the harsh winter and port strikes and is not reflective of the true state of the economy.What's more, never mind the weak consumer spending, take a look at both the strong manufacturing numbers and particularly constructing spending, up 2.2% when only expected to come in at 0.7%.

You get the point ........ nothing is straightforward. Some numbers are more important than others though, and will definitely have a more predictable market effect (unless of course they come in exactly as expected).  This week, look out for May's US non-farm payrolls and unemployment rate on Friday. Consensus expectations ? 225,000 and 5.4% respectively.