Today we get
another glimpse into the behind-the-scenes machinations of the “data dependent”
Federal Open Market Committee (FOMC) with the
release of the minutes from the April 26-27 meeting.
While the Fed
has a dual mandate of maximum employment and price stability, lately there has
been considerable discussion about the how much the Fed should let global
considerations factor into Fed policy. 
Clearly, the pace of economic growth in China or the
stability of euro zone has a significant downstream effect on economic activity
in the United States.  Additionally, with
48% of revenues from the S&P 500 companies coming from international
markets, policy formulation in an increasingly interconnected global economy is
becoming more complicated with each advance in technology, communications and
Given this
backdrop, just how does the data look? 
For the past seven years I have been publishing an economic data
surprise index that aggregates U.S. economic data relative to consensus
expectations across areas such as employment, the
consumer, housing/construction,
manufacturing and inflation.  The chart
below aggregates data across all these areas and shows data peaking relative to
expectations during October 2014.  Since
that peak, however, economic data relative to expectations deteriorated
sharply, falling to an all-time low during the middle of January 2016 that was
matched again at the end of last month. 
[source(s):  VIX and More]
If the Fed is
indeed data dependent, then there is no avoiding the conclusion that aggregate
data relative to expectations has been a disaster for the past 1 ½ months.  There are some signs of stability forming in
the current environment and clearly the strength of the dollar and the
price of crude
will have a great deal to say about economic data going forward.  Then again, international events such as the Brexit vote and
the evolution of negative
interest rate policies
of central banks across the globe may trump all
domestic U.S. economic data.
[Readers who
are interested in more information on the component data included in this
graphic and the methodology used are encouraged to check out the links below.
For those seeking more details on the specific economic data releases which are
part of my aggregate data calculations, check out
of the Week: The Year in Economic Data (2010)

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