Courtesy of Mish
Inquiring minds are reading Fed Chair Janet Yellen's Outlook for the Economy speech, delivered today at the Providence, Rhode Island Chamber of Commerce.
Here are a few snips from what I believe to believe is a way over-optimistic assessment. I provide rebuttals following each statement.
Yellen: The U.S. economy seems well positioned for continued growth. Households are seeing the benefits of the improving jobs situation, and consumer confidence has been solid.
Mish: The economy is not positioned for much, if any, growth. Consumer confidence is not solid, and consumer spending plans have been sinking like a rock. See Consumer Confidence Plunges Below Any Economist's Estimate; Consumers Shock Economists.
Yellen: The drop in oil prices amounts to a sizable boost in household purchasing power. The annual savings in gasoline costs has been estimated at about $700 per household, on average, and savings on heating costs–especially here in the Northeast, where it was so cold this winter–are also large. Given these energy savings on top of the job gains, real disposable income has risen almost 4 percent nationally over the past four quarters. Households and businesses also are benefiting from favorable financial conditions. Borrowing costs are low, supported by the Fed's accommodative monetary policies. And credit availability to both households and small businesses has improved.
Mish: Any savings on energy went up in smoke on rental increases and rising health care costs. See CPI Shows Sharply Rising Medical Costs; Huge Obamacare Hikes Planned.
Yellen: In recent months, as I noted earlier, there has been some softness in the economic data. Recent indicators of both household spending and business investment have slowed, and industrial output has declined. The Commerce Department's initial estimate was that real gross domestic product was nearly flat in the first quarter of 2015. If confirmed by further estimates, my guess is that this apparent slowdown was largely the result of a variety of transitory factors that occurred at the same time, including the unusually cold and snowy winter and the labor disputes at ports on the West Coast, both of which likely disrupted some economic activity. And some of this apparent weakness may just be statistical noise. I therefore expect the economic data to strengthen.
Mish: In a shock to economists, consumers are doing exactly what they said they would do, not what economist's models predicted consumers would do.
For what consumers said they would do, please see Household Spending Growth Expectations Plunge; Recession Already Started?
For what consumers actually did, please see Dismal Retail Sales Numbers Suggest Recession Likely Underway.
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