Afternoon Must-Read: Tim Duy: A Lackluster Start to the Year

Tim Duy: A Lackluster Start to the Year: “Incoming data… disappoint[s]….

Part of the blame should fall on overly optimistic interpretations of data patterns at the end of 2013. In particular, the recently downwardly revised GDP numbers were less than spectacular abstracting away from inventory effects. Looking at real final sales, I see slow and steady, or even a modest softening, not magic acceleration…. The latest data disappointments were the weak ADP report suggesting a just 139k private sector NFP gain in March and a similarly weak reading on the service side of the economy from ISM…. My baseline expectation for monetary policy is that recent softer data makes little difference in the tapering plans…. My suspicion is that [Yellen] will need to see real evidence that labor market slack has evaporated in the form of faster wage growth before she begins to worry of overshooting.