NEW YORK (TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.
Among the posts this past week were items on Chicago Fed data and on China's economy.
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Parsing the Economic Data
Originally published on Thursday, May 22, at 9:33 a.m. EDT.
The Chicago Fed National Activity Index showed a decline of -0.32 vs. expectations of a flat reading, while the March reading was revised up from 0.2 to 0.34.
Production-related indicators showed a reading of -0.37 vs. a March number of +0.27. This was the result of a declining rate of growth in manufacturing production (0.4% vs. 0.7% prior) while manufacturing capacity utilization declined from 76.9 to 76.4. The consumption and housing category was weak again as well, declining to -0.12 from -0.07. Finally, the employment category was the strongest, contributing +0.17, up slightly from +0.15 in March.
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While this reading is clearly disappointing, there are a few mitigating factors:
- The NAI tends to be fairly volatile month to month, but the three-month moving average showed improvement in April.
- This index is often heavily revised, as at the time of first estimate only 49 of the 85 data points used in this reading are official.
- Other data from April on both production and consumption have shown a stronger economy than this number would suggest.
- The diffusion index within this report showed a reasonably stable reading.
While I wouldn't dismiss this number outright, as it's a very broad indicator of economic activity and it is (on balance) a negative data point, the above reasons (along with the economic surprise index having bottomed in early April) point to a stronger economy than this reading would suggest.