Economic Data Still Bad as Cost of Living Rises (Audio)
In his latest podcast, Peter Schiff reviews the latest economic data that indicates how poorly the economy is doing. Financial forecasts continue to be completely off-base, and many important data points have seen downward revisions. Meanwhile, the cost of basic necessities has gone up thanks to inflation. Peter expects the employment data is the outlier and will eventually catch up to the rest of these indicators.
Highlights from Peter’s Podcast:
“Here’s a real bad number that came out. Chicago Fed National Activity. This is a perfect example of Wall Street’s optimism of always expecting good news and then getting bad news. The Chicago Fed National Activity Index was down in December. January was reported as a gain of 0.13. That was the original report. Now the consensus for the February number that we got on Monday was [the level would increase to 0.15]… Here’s what we actually got: They went back and revised the original 0.13 from January to a negative 0.1. January didn’t gain, it was down to negative 1. And February, instead of coming in at 0.15, came in at negative 0.11. So in other words, February was actually worse than the down revision of January…
“Now we have 3 consecutive months where the Chicago Fed has dropped. This hasn’t happened since June 2011… We’re starting to act like 2011. The numbers are deteriorating rapidly. What’s the Fed going to do? We know what they’re going to do, because they do the same thing all the time…
“The only way people can afford to overpay on their house is because they’re getting a sweetheart deal on their mortgage. If the Fed takes that sweetheart deal away, nobody can afford to buy unless the prices fall significantly…
“The bad news that came out today was in the Richmond Fed manufacturing Index. Now this number, again, I think they were looking for a positive number… they were looking for a plus 2… and the Index came out at negative .8… Again, this is consistent with a weakening economy…
“We did get some supposed good news on inflation. The CPI… came out today. The expectation was for a 0.2% increase in the headline number, and that’s exactly what we got… The year over year change was 0.1… When you take out food and energy though, the so-called ‘core’, that was supposed to come in at 0.1 and that came in at 0.2… But if you actually look at the numbers, everything was up, pretty much across the board. Food prices were up, energy prices were up, shelter was up. All the basics that you need to live got more expensive. So the Fed can breathe easy that the cost of living went up, and if you want to buy an apartment, it’s going to cost you more…
“I think the only thing that the markets are going to be focused on pretty soon is inflation. Yellen has said, and she made it clear, that the jobs market needs to improve from here before she can consider raising rates. The improvement that we’ve had to date doesn’t cut it. That shows that the Fed doesn’t believe the hype and is looking beneath the surface…
“I think the jobs numbers are more of a lagging than a leading indicator. This is not just what I think, this is generally accepted by most economists that these numbers would lag rather than lead. Employers, when they’re hiring, they’re hiring based on what they think might happen. If the employers are optimistic, they might hire more people. If it turns out they were wrong and the economy goes south, they would be firing those people after the fact. And that’s what we’ve had…
“I think as employers realize they were looking at a mirage and not an actual recovery, they’re going to be laying off some workers. Rather than all of the weak economic data turning around and suddenly becoming positive to match the jobs numbers, it’s far more likely the jobs numbers will turn south to match all of the other economic data that is a leading indicator rather than a lagging indicator…
“Then obviously the Fed is not going to be able to raise rates, because its already stated, it can’t raise rates unless the labor market strengthens from where it was. If it begins to weaken, at least the labor market is not even a factor anymore. Rates will stay at 0 indefinitely…
“What’s likely to happen is that the economy’s going to weaken and inflation is going to get worse, especially if I’m right about the dollar having peaked and then surrendering a lot of its ill-gotten gains. Remember, the dollar’s gains were predicated on the Fed raising rates to cool off an accelerating economy. If instead the Fed is on hold at 0 or launches QE4 to try to rescue a faltering economy, all bets are off…
“When the focus moves away from employment and to inflation because the labor market weakens and that’s no longer an issue for tightening – in fact, the Fed is going to want to be more easy, launch QE4. There’s going to be a lot of pressure on the Fed when the labor market turns south and the rhetoric starts to head up for the 2016 elections…
“Once we focus on inflation as the barometer for when the Fed’s going to raise rates, more people will know they’re never going to raise rates… Eventually we will have a currency crisis and that will be something that forces the Fed’s hand.”
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