Weekly Economic Report
We are getting the feeling that momentum is shifting. The extreme optimism that has been driven by the tsunami of stimulus so far this year is beginning to break on the rocks of reality. Two weeks ago, it was the employment report that disappointed. Last week, it was industrial production that fell short. This week, it was an unexpected decline in housing starts. Production side data simply has not been able to match the optimistic expectations underpinning markets, as supply chain constraints make it difficult to ramp up activity that quickly. Seasonal factors are a huge part of the problem. From March through June, actual economic activity normally grows rapidly as winter turns to summer. This year, it has been harder to find the workers and materials to meet that normal seasonal increase -- never mind the hefty seasonally adjusted pop the consensus has expected due to the money. Retail sales have done better, as inventories satisfied some demand. Housing permits still rose, as filing requires little real economic effort. However, we are beginning to see manufacturing data like the Philadelphia Fed, Empire Index, and NY Fed Weekly Economic Index struggle as producers are unable to hire or acquire supplies to meet demand. This week, the Citi Surprise Index went negative (signaling missed expectations) for the first time since June 2020. We see relief unlikely before September, when the seasonal slowdown may be less pronounced.