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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: marginmike who wrote (2830)	5/5/2000 10:42:00 PM
From: J.T.	Read Replies (1) \| Respond to of 19219

marginmike, all the economic numbers in the past week - the employment cost index, the productivity numbers, and now the employment report - it is a troublesome trifecta... the analysts have all weekend to soak up the data and might wake up to a bad dream next week in the markets. here is a late economic report on GDP, ECI and Inflation but worth posting nonetheless from Raymond James: Economic Monitor Commentary by Dr. Scott Brown For The Fed, More Worries... GDP growth for the first quarter was reported at a 5.4% annual rate, down from 7.3% in 4Q99. However, the pace of underlying demand accelerated in 1Q00. Domestic Final Sales (GDP less net exports and the change in inventories) rose at an 8.0% pace, versus 5.9% in the fourth quarter. GDP inflation gauges ticked up and employment costs rose sharply. The data suggest the Fed may be behind the curve on inflation. Not Just Strong, But Strengthening First quarter growth was led (again) by the consumer. Inflation-adjusted personal consumption expenditures rose at an 8.3% annual rate (vs. a 5.9% pace in 4Q99 and 5.6% over the four previous quarters). Such a large gain may sow the seeds of a more moderate increase in 2Q00. That is, maintaining that kind of momentum for long should prove difficult (of course, we said the same thing heading into 1Q00). Similarly, the first quarter's 21.2% rate of growth in business fixed investment was boosted mostly by a recovery from a Y2K-related slowdown in 4Q99 (when BFI rose at a 2.9% pace) - the pace for the last two quarters combined (12.1%) was a tad higher than that of the previous four quarters (10.3%). The GDP report's inflation gauges showed the impact of higher energy costs. However, unlike the March CPI data, there was no broad-based acceleration. Wages And Inflation The Employment Cost Index rose 1.4% in 1Q00, up 4.3% year-over-year. However, private sector labor pressures were even greater (up 1.5% for the quarter and 4.6% y/y). Private sector benefit costs rose 2.3% from 4Q99, a 5.5% rise from a year ago (much of that due to increases in health insurance, supplemental pay, and paid leave). It's dangerous to put too much weight on one particular data point. Large moves in economic data often show moderation in subsequent releases. However, the 1Q labor cost acceleration is particularly worrisome. For the Fed's inflation hawks, tight labor market conditions have been dry tinder, waiting for the slightest spark to ignite the flames of inflation (pardon the purple prose, but that's how the hawks see it). With strong job growth and a drop in the unemployment rate (figures due on Friday), certain Fed officials are likely to get increasingly agitated. Greenspan and the rest of the moderates will have a tough time resisting the hawk's call for a 50 basis point hike at the May 16 FOMC meeting. And Another Concern... The GDP data also show the growing "twin" imbalances: the rising trade deficit and the shortfall in domestic savings. A weak euro is further adding to these imbalances, but the trend can't continue forever. How it unwinds is an open question, but it may not be pretty. May 1, 2000 Best Regards, J.T.