Negative Spin on Normal Data

Some market observers, including our favorite bear, Barry Ritholtz, seem intent on forcing a negative interpretation on data that are perfectly consistent with GDP real growth of about 2%.  Check out Barry's take on the numbers.

A slowing economy is the Fed's intended policy result.  Slowdown in the components of GDP, like consumer spending, is normal and expected.  The reports for the Chicago PMI and today's ISM are completely consistent with 2% economic growth as we pointed out in yesterday's forecast and today's analysis.

Market Watch also incorrectly calls this a "fresh sign of economic weakness" in an article that has a negative spin throughout.  Only readers who are patient enough to read to the last sentence will see the ISM's own analysis of their data:  It means GDP growth of about 2%.

Objective analysts should ask what the overall picture is for an economy slowing to the current growth rate.  To get the right answers, one must start with the right questions.

At "A Dash" we have commented extensively on the need to ask:  What would we expect to see in normal data?

Comments

[oldprof]

Hi Muckdog -

I'm not sure how much the Fed targets what we identify as bubbles. I would think that more of it would leak out into the written material of those who have retired.

But you may be right. If so, they have managed to pressure those with ARM's and the like, while it is still possible to switch to a fixed rate mortgage at an attractive level. Since those rates are more geared to the ten-year, I guess we have the Chinese to thank!

[oldprof]

John -- Thanks for your comment. We try hard both to be objective and to find the best evidence for any conclusion.

To us, that means reading a wide range of material, studying evidence, and figuring out who makes sense. Some commentators aim for "debating" points, sounding persuasive with some good stories. The best thinkers are not always the best presenters...

[muckdog]

I think the Fed was intentionally ending the housing bubble, and that's why they raised rates as far as they did. They could've stopped in the 4's as far as the economy goes, and have certainly risked something more than a slowdown and soft landing. But they definitely did kill the housing bubble.

[john w]

Thank you, not only for your "dash of insight" but also for your objectivity and obvious wisdom.

I stopped reading Ritholz and Cara and the rest of their ilk when I realized that they were costing me money.