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Registered Investment Adviser Caleb Lawrence

The major averages managed to retain their composure despite last week’s poor Gross Domestic Product report, marking small gains in early trade to begin the week on generally disappointing but still positive economic data.

Personal Income missed expectations in March with a .2% gain. Strength was seen in proprietors or small business income and transfer payments essentially various forms of social spending. The savings rate increased to 5.9% after Personal Spending missed expectations substantially with a .1% decline. Despite a small election victory gain the 3-month moving average for this series continues to slip and is now negative.

The Personal Consumption Expenditures or PCE price deflator fell .2% in March pulling the annualized gain down to 1.8% on broad-based price declines though energy costs fell markedly.

Manufacturing data also softened notably in April as the Institute of Supply Management reported a 2.4 point drop in its manufacturing index to 54.8. Weakness was seen in new orders and employment, prices paid slipped a little but remain very high at 68.5.

Construction spending missed substantially in March falling .2% as commercial and public construction spending declines offset the gain seen in residential construction.

Again the incoming data continues to show that the economy is at best muddling along, the Trump reflation trade is waning as his administration appears increasingly ineffective and unable to deliver on its campaign promises. At some point the weak economic and GDP data will stick becoming a trend. Given the levels of debt saturation, employment data and the Fed’s very limited wiggle room with respect to interest rates, and we may find ourselves between a rock and a hard place.

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