Investors will have to wait until new year for clear data on US economy – Financial Times
Investors looking forward to long-delayed data releases this week might have to wait longer for clarity on the state of the US economy.
Two reports on jobs and inflation from the Bureau of Labor Statistics will provide the best read in months on the trajectory of the economy after a record government shutdown halted regular data releases. But analysts warn the delayed statistics will be tarnished and provide only limited clarity on the health of the world’s biggest economy.
“We’re still in the clouds and the data we’re going to get is better than not having data,” said Diane Swonk, chief economist at KPMG US. “But it’s not going to be definitive because it is reflecting an economy in flux and it’s also still incomplete.”
The reports come a week after the Federal Reserve voted to cut interest rates to a three-year low following a divisive meeting that laid bare deep fractures in the central bank over whether to prioritise tackling a weakening jobs market or creeping inflation.
The unprecedented government shutdown, which ended last month, exacerbated the uncertainty. Data collection by federal statistics agencies was halted for the duration, with some crucial reports postponed and others scrapped outright, obscuring policymakers’ view of the economy.
Fed chair Jay Powell indicated last week that borrowing costs were “now within a broad range of estimates of its neutral value” and that any further cuts in the new year would be dictated by fresh data.
“We are well positioned to wait to see how the economy evolves,” he said.
Employment figures released on Tuesday will cover November and a partial October reading. Thursday’s consumer price index report will only cover November after the October report was ditched.
Frances Donald, chief economist at Royal Bank of Canada, said: “Both the jobs and the inflation data that’s coming through may have distortions that don’t give us a clean read, both because of the impact from the shutdown itself, but also because of various methodological adjustments that had to be made.”
“So it’s going to be very difficult to look at anything from October, November or December and have grand conclusions and or takeaways,” Donald added.
Still, with the Fed starkly divided over how far and fast to cut rates amid a dearth of data, the employment figures in particular could play an important role in how it proceeds on borrowing costs next year.
“A weaker reading would establish a softening trend that markets and Fed officials would extrapolate into next year,” said Andrew Hollenhorst, chief economist at Citi. “On the other hand, a stronger reading would make the recent weakness look more like a temporary, seasonal soft patch.”
But the inflation data would be “less complete and harder to make sense of than the jobs report”, Hollenhorst added. The Fed has been split over how much new tariffs are likely to drive up prices in the months ahead.
“It may take until December data is released in January to feel confident regarding whether inflation is cooling toward target or stuck at elevated levels,” he said.
