{"id":1029,"date":"2017-06-13T12:02:44","date_gmt":"2017-06-13T16:02:44","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=1029"},"modified":"2017-06-13T12:02:44","modified_gmt":"2017-06-13T16:02:44","slug":"may-producer-prices-and-small-business-optimism","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1029","title":{"rendered":"May Producer Prices and Small Business Optimism"},"content":{"rendered":"

KEY DATA:<\/u><\/strong> PPI: 0%; Over-Year: +2.4%; Goods: -0.5%; Energy: -3%; Services: +0.3%\/ NFIB: Unchanged<\/p>\n

IN A NUTSHELL:<\/u><\/strong> \u00e2\u20ac\u0153With inflation at reasonable levels and small businesses optimistic, tomorrow the Fed can do what it is expected to do, which is raise rates again.\u00e2\u20ac\u009d<\/em><\/strong><\/p>\n

WHAT IT MEANS:<\/u><\/strong> The Fed is starting its two-day meeting today and it would take a blockbuster number for the Fed to change course. Today\u00e2\u20ac\u2122s reports don\u00e2\u20ac\u2122t qualify as they were in line with what we all know and expect from the data: Inflation is not a threat but business leaders are exuberant. Wholesale costs were flat in May as declining food and energy prices offset moderate increases in other goods and services.<\/em><\/strong> Excluding energy, goods costs were up moderately with the pace over the year pretty much at the Fed\u00e2\u20ac\u2122s target. Indeed, if you look at the details and the special indices, most rose since last May by somewhere between 1.5% and 2.5%. In other words, at least when it comes to producer prices, inflation is right where it needs to be for the Fed to make any move it wants to make. <\/em><\/strong><\/p>\n

If inflation is pretty much on the mark, what about growth? The disappointing first quarter will likely be followed by a better second quarter. But going forward, it will take businesses expanding more aggressively to move the expansion into higher (not necessarily high) gear. If you believe the business optimism numbers, the corporate sector is ready and willing to do its part.<\/em><\/strong> We already knew that CEO confidence was soaring and that exuberance is being matched by small business owners. The National Federation of Independent Business\u00e2\u20ac\u2122 Confidence index was flat in May. However, that is misleading. It remained near record highs. Respondents think it is a great time to expand and they are extremely hopeful that business conditions and earnings will improve. <\/em><\/strong>They are hiring and hope to hire more workers, but they cannot find qualified applicants. No surprise there.<\/p>\n

MARKETS AND FED POLICY IMPLICATIONS:<\/u><\/strong> The Fed will announce its decision tomorrow afternoon and we are likely to see another tick up in rates. The markets have given the FOMC a free pass so it might as well take it. <\/em><\/strong> But it isn\u00e2\u20ac\u2122t just the funds rate that will be watched. It is clear the members want to start reducing the Fed\u00e2\u20ac\u2122s balance sheet and we need to look for any signals on when that might start. We need to also watch for indications that the process of normalization will continue on a consistent basis. The view on the economy is important in making any judgment on how many more times the Fed may move this year. Today\u00e2\u20ac\u2122s data should have made few waves with investors. It\u00e2\u20ac\u2122s tomorrow\u00e2\u20ac\u2122s statement, press conference and economic projections that most people will be watching closely.<\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: PPI: 0%; Over-Year: +2.4%; Goods: -0.5%; Energy: -3%; Services: +0.3%\/ NFIB: Unchanged IN A NUTSHELL: \u00e2\u20ac\u0153With inflation at reasonable levels and small businesses optimistic, tomorrow the Fed can do what it is expected to do, which is raise rates again.\u00e2\u20ac\u009d WHAT IT MEANS: The Fed is starting its two-day meeting today and it … Continue reading May Producer Prices and Small Business Optimism<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1029","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1029","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1029"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1029\/revisions"}],"predecessor-version":[{"id":1030,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1029\/revisions\/1030"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1029"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1029"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1029"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}