January 15, 2019 9:10 a.m. A Swing and a Miss for Manufacturing & Inflation-by-Lester Murray

The New York Fed, not part of the partial government shutdown, announced this morning that its Empire Manufacturing Index is acting like there's something out there that is shut down. This measure of manufacturing activity in the state of New York tends to have a high correlation to manufacturing activity elsewhere throughout the country.  Its upwardly revised December value of 11.5 was expected to slip a little bit to around 10.  Instead, the bottom fell out and it plunged to 3.9.  This is actually the continuation of a trend being seen the last few weeks and mirrors similar results from other regional indicators of manufacturing's vitality.  

The Bureau of Labor Statistics, also unaffected by the shutdown, reported that wholesale inflation as measured by its Producer Price Index (PPI) also failed to reach anticipated levels.  The core index (without food & energy) fell by .01%, missing the expectation of a 0.2% rise.  That puts the year-over-year index value at 2.7% when it was supposed to be 2.9%.  This report comes on the heels of last week's report on consumer inflation which similarly undershot market surveys.

So far, equities have strongly regrouped after starting the day haltingly.   Treasuries are more less unchanged on the day:  Ten Year @ 2.70% with the Two-Year @ 2.52.  Today's Brexit vote is not expected to go the way of Mrs. May, but a variety of outcomes are possible.  In the meantime, crude oil is up over $1/barrel with $52 in sight. Maybe.