Another day, another downbeat bit of economic data. Wednesday saw a sub-50 reading from the Institute for Supply Management’s manufacturing gauge, which the supply-management association says historically correlates to a 0.3% annualized gross domestic product contraction. On Tuesday, the Conference Board said its consumer expectations index fell to 69.7, and historically 80 is the level which signals a recession within the next year.
All this “soft” data is bad, but the hard stuff is anything but. Pretty much everything apart from housing has come up strong of late. The Atlanta Fed’s GDPNow estimate, which does take the ISM data into account but also blends in harder data, is estimating 2.3% growth in the first quarter, which perhaps signals it’s time to throw some of this soft data out the window. For example, the Conference Board’s expectations index has been below that 80 mark for 11 of the last 12 months. The question of what is making the economy so strong in the face of aggressive Federal Reserve interest-rate hikes and jaw-dropping inflation is obviously puzzling everyone, particularly as pandemic savings which have been estimated at about $2.3 trillion are being wound down. Kevin Muir, who pens the Macro Tourist blog, asked the question of why the economy is so strong in a post this week. One thing he highlighted is the stimulus still to hit the U.S. economy. This will come not from the federal government but from states. He cites Alabama’s treasurer, Young Boozer (yes), who reportedly said that states will have over $1 trillion to spend on infrastructure over the next three to …