While January brought some frigid temperatures across the entire country, including those gulf coast states, did the economy cool down as well? As usual there is data pointing in both directions, also typical for the past few years is that most of the measures are positive. Part of the reason this economic expansion has gone on so long, and remains so stable is reflected in this pattern. Two or three steps forward and one step back. Housing starts for example have been strong for the past five years, yet every few months we see new housing starts decline for a month, maybe two, then back to growth. After three strong monthly gains, guess what, housing starts declined by 8% last month. Good things are again likely on the horizon, as housing permits were up last month. You must get a permit before you start a build, and two months ago permits were down, the month before the starts declined. A heavily correlated relationship between these two is pretty obvious.
The Chicago Fed releases a monthly Index of National Activity number, measuring 85 indicators of economic activity. The Activity index rose by 0.11 in November and 0.27 in December, January was not released at the time of this writing. A reading of 0 means we are on the historical trend, positive numbers like the last two months means above trend activity, conversely negative numbers would have meant slowing economic activity. The Federal Reserve also releases data, know as the “Beige Book” report. It showed moderate growth and subdued inflation, as well. Nationally, Industrial Production, expected to increase 0.5% instead was up 0.9%, however regionally the Philadelphia Fed. showed manufacturing activity declining in January for its region.
Inflation, Interest rates, and of course government policy will continue to drive analysis and over-analysis in the coming months. Meanwhile, Tax Season is in full swing. Good financial planning can and should be part of your tax season work. Capital Gains – both long-term and short-term, Dividends and interest, distributions, and more all play into both the saving and the distribution phase of your plan. This is a great time of year to review (or begin) your plan, something to consider on the next poor weather weekend.