Bad Weather Over, but Bad Economic News Keeps Coming (Audio)

Currency traders have been blaming the weak first quarter GDP on poor weather. Peter Schiff argues that they’re going to have to start looking for new excuses, because April data is starting to trickle in and it doesn’t look good at all.

Highlights from Peter’s podcast:

“Every time unexpected bad economic news comes out, the dollar does sell-off… I can normally tell when the news is coming out, because I can see a dip down in the dollar… Then it rallies back overnight, because the traders are conditioned to buy every dip in the dollar… They buy every dip, even though the reason the dollar dipped is because the economic news is bad. But again, everybody dismisses it, because it doesn’t count because it happened during the winter…

“If you’re going to throw away the first quarter every year, yet still expect 3% economic growth, that’s hard to do when you’re zeroing out one quarter of the year. It’s hard for the rest of the year to make up for that one bad quarter…

“The reason for the big rebound in GDP in the second and third quarter [of 2014] was two-fold. One was Obamacare. All of a sudden, people who didn’t have insurance had to buy Obamacare and that extra spending was in the GDP, even though a lot of that money had to be borrowed… The more important driver, particularly in Q3 was inventory build. That was because business was so convinced that there was going to be a recovery that they loaded up on inventory to prepare for it…

“As I’m recording this right now, oil prices are up $1.80 a barrel. We’re at $55.20. This is the first time we’ve been above $55 a barrel all year. You have to go back to December to get an oil price this high as it is right now… If the consumer could barely make it earlier in the year with the benefit of falling oil prices, what’s going to happen if oil prices are now rising for the balance of the year? Because I think oil has bottomed out…

“People were expecting the consumer to really benefit from lower gas prices. I think he did, but the consume was in such bad shape he could barely walk. He got a crutch in the form of cheap gas prices… Now that crutch is about to be taken away. So the numbers would have been even weaker had it not been for the salvation of cheap gas prices…

“Let us get to the data of the week and dissect all the bad news that Wall Street is ignoring, particularly foreign exchange traders… The stock market goes up on the bad news, because they sense that interest rates stay lower for longer. The currency traders are the most reluctant to give up the ghost…

“The numbers [for retail sales] were not horrible, but they were not as good as Wall Street was looking for. Remember, we were rebounding from some very, very bad numbers for the prior few months… They were expecting a 1.1% jump, instead the bounce was only 0.9%. More importantly, take out autos… and they were looking for a gain of 0.6%, and we only got a gain of 0.4%. So that was only two-thirds of the increase that Wall Street was expecting…

“Also, the March small-business optimism index came out. It fell to 95.2%. That’s the lowest level in 9 months. And hiring plans in small businesses dropped to the lowest level in 6 months. Of course, I think small business is going to become more pessimistic as the phony nature of this recovery is revealed.

“We also got business inventories for February rising to 0.3%, based on weak wholesale sales. Inventory to sales ratio… holding steady at 1.36. That is the highest level of inventory to sales since July of 2009. If businesses are already loaded upon inventory that they shouldn’t have accumulated in the first place last year, they’re not going to do it again…

“We got a horrible print for the April Empire State Manufacturing Index. [It] was expected to improve slightly from last month. Last month was 6.9; it was supposed to go up to 7… The expectations ranged from +3 to +10.5. What did we get? Minus 1.9. That’s near a two-year low. Also, if you look at the internals, they were horrible. Employment plunged; hours worked plunged; new orders tumbled… Just an all-out bad report for manufacturers.

“That wasn’t it. We got March industrial production dropping 0.6. They were looking for it to drop, but only 0.3. So the drop was twice as bad as people had been expecting. This was the fourth consecutive month that industrial production was below estimates. Right now, we’re at the lowest level since August 2012. Again, bad economic data [that you] can’t blame on the weather. This data is coming in April…”

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