Retail Sales, CPI and the Taper

Real retail sales kept growing at a good pace in Q4, while the available data on Durable Goods (October and November) suggests a slight slowdown but still a healthy pace. No wonder y/y growth in GDP is accelerating.

Meanwhile the slowdown in Core CPI has stopped but no clear turn to the upside is visible yet.

With economic activity still strong and CPI seemingly stabilizing, the Fed can still find excuses to continue tapering.

Employment - further slowdown expected

Further slowdown expected for the pace of growth in employment.

New Orders Index- strong but peaking

I have written already about the fact that the New Orders Index (component of the ISM PMI) is at peak levels but this time I wanted to show it another way, plotted as a quarterly 3-month average against the GDP. I am planning to show similar charts for other important economic indicators in the future.The red bar in the chart is based on an estimate for Q4 GDP.

So, it is peaking but this does not mean much for the economic expansion. Even lower levels still represent growth.

On the other hand, peaking also means strong and the stock market and the dollar will anticipate the continuation of tapering. This means a larger correction for the S&P500 soon.