If there was one thing the bulls did not want this morning, it was a goldilocks report in the trifecta of economic data, which included CPI, Initial Claims and the Empire Fed. Sadly, Goldilocks is precisely what they got with CPI printing just as expected, up 0.2% from June, and up 2.0% from a year ago (ex food and energy also in line at 0.2%), claims coming modestly better than expected at 320K vs Expectations of 335K, and finally the Empire Fed offsetting the sligh claims beat by printing at 8.24 on expectations of 10.00, down from 9.46 in July. As a reminder, only a big economic shock could have derailed the Fed's September taper intentions. So far it is not coming, which means only the August NFP report is left.
Breaking it down, inflation was in line with the Fed's expected 2% annual rise:
And broken down by components:
Initial claims plunged to their lowest level in almost 6 years. Printing at 320k (vs an expectation of 335k), the claims data is now at the same consistent pre-crisis levels. Markets are not reacting well to this 'good news' as it furthers the case for Sept-Taper. Just such a shame it does not correlate well with real employment and the JOLTS data. One could argue of course, with initial claims plunging that given slowing revenues that companies have hit their cost-controlling job-cutting limit – not a good sign for margins going forward.
Empire Fed missed expectations for the first time in 3 months making the 4th miss in the last 6 months. It appears the Empire Fed is playing out the same cyclical pattern of the last 4 years. Under the surface a modest improvemnt in number of employees was offset by a drop in shipments and an expectation of a plunge in the average workweek seems at odds with the expectation for more hiring (unless they are all part-time that is).
From the report:
The August 2013 Empire State Manufacturing Survey indicates that conditions for New York manufacturers improved modestly for a third consecutive month. The general business conditions index, at 8.2, was little changed from last month. The new orders index slipped four points to 0.3 and the shipments index fell seven points to 1.5, suggesting that both orders and shipments were flat. The prices paid index rose slightly to 20.5, and the prices received index climbed three points to 3.6. Labor market conditions improved, with the index for number of employees climbing eight points to 10.8 and the average workweek index rising twelve points to 4.8. Both of these indexes reached their highest levels in a year. Indexes for the six-month outlook generally pointed to strong optimism about future business activity; the future general business conditions index rose five points to 37.4, its highest level in more than a year.
[an expectation for a falling average workweek yet more employees... sounda an awful lot like moar part-time workers...]
In response to a series of supplementary questions, manufacturers predicted that overall sales or revenues would be 5 percent higher in 2013 than in 2012; employment levels and capital spending were expected to be little changed from last year. Also, more respondents reported that they had scaled back than raised their sales expectations for 2013 from what they had anticipated at the beginning of the year. Hiring and capital spending plans for 2013 were only slightly less positive than at the beginning of the year.
And while we find the spin in the last sentence amusing, the worst news (remember, under central planning good news is bad) is the Number of Employees rose from 3.26 to 10.84: hardly the stuff that horrible upcoming Payroll reports are made of. And if the NFP comes in tepid, Taper is inevitable.
