The Great Inflection  We’ve been waiting on a manufacturing recovery after trade war resolutions and it might finally be happening. The Philly Fed’s manufacturing index jumped to the highest level in three years this month with new orders seemingly driving a big part of the improvement. The six-month outlook measured by this index also increased for the fifth straight month.  Moral of the story: The New York Fed’s manufacturing survey showed similar optimism. These two reports put together are usually considered to be an indication of the broader US national ISM manufacturing index, which showed early signs of improvement in January and I’d expect incremental strength again for February.  Building Optimism  The FOMC seems…

Tale of two cities  Inflation is remaining in check – consumer prices only increased by 0.1% in January. On an annualized basis, that’s a 2.5% increase over the last 12 months, which is the biggest increase we’ve seen the fall of 2018. Price increases were mainly driven by the cost of living (rent), medical care, clothing, eating out, and flight tickets. The core inflation number that’s more closely followed, increased 0.2% for January but remained flat for its annual reading at 2.3% (it’s been at 2.3% for five months now). Moral of the story: Inflation has been running low for years and I can’t foresee anything causing it to really ramp…

Light at the end of the tunnel? After being under pressure for months because of trade tensions, the manufacturing sector is finally showing signs of recovery after trade deals with China, Mexico and Canada were signed last month. The ISM manufacturing index came in over 50 for the first time in six months (a reading over 50 indicates expansion, while a reading below 50 indicates a contraction). New orders and production both increased in January, but employment still remains muted due to a lack of skilled labor.  Moral of the story: While a trade resolution might have helped the manufacturing sector’s contraction find some sort of a bottom, I’m not…

The one where you realize the chips are not scoops…what a letdown  GDP growth came in at 2.1% for the fourth quarter, bringing 2019 GDP growth to 2.3% (slowing from 2.9% in 2018). Consumer spending, which is the main engine of growth in the US, increased only 1.8% (slowing from 3.2% and 4.6% earlier in the year). As anticipated, the plummeting trade deficit due to the tariffs on Chinese imports was a boost but is expected to reverse within the next quarter given the ongoing trade negotiations between the two nations. The other big lift in the quarter came from housing outlays that increased 5.8% as mortgage rates dropped. On the other hand, however, business…