There are two dynamics impacting the view of the mkt crowd just ahead; more accurately, just how they will be misled. One is that economists still under-estimate US vigor for H1, relaying on a replay of 2011 to set them right and reclaim their dignity. The other is that these same observers under-estimate the impact of crude, thus the impact of gasoline prices on the American consumer.
We must realize that consumer activity is significantly threatened. We were the first to understand US vigor when others were looking the other way; we want to be first to understand that being curtailed, if indeed, it is to be so.
We have two key releases this week (neither of which will shed any light on the impact of crude): the ISM Feb Non-manuf survey Monday and Feb NFP on Friday (Factory Orders (Monday) are rarely a mkt mover as we already have the Durables component). We can expect the Feb ISM survey to come in just a tad, worst case, but when we see that print we should recall that business activity in the service, construction and gov’t sectors accelerated in Jan to is best pace in nearly a year. Not too bad. It’s simple folks. A cyclical expansion is currently in place and it is gaining strength.
Finally, to Friday’s Feb Payroll release. We’re not sure re the headline print, but high-powered jobs will expand, esp manufacturing. And av hours worked and salaries will also pick up. No steam roller, but certainly a contradiction to last week’s Income and Spending print. Consumers are optimistic. They’re borrowing for better times ahead. We’re not launching a satellite here folks.
Consumer reaction to gasoline is key and for that we will have to wait. That is part event, part wild card.
We no longer have the E-Z as a wild card; only as an irritant, seemingly unending.
Robert Craven
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