Snowstorms and Cold Economic Data

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Two stories gripped Seattle last week. The first was the snowiest February in 100 years, and the second was some equally cold economic data. Though the events are certainly not related, as correlation does not imply causation, there is a common moral to these stories.

First, the snow. Seattle does many things well including technology, aerospace, ecological awareness and the perhaps the best public ferry system in the world. But it appears Seattle is less than efficient in plowing its roads when it snows. Everything was snarled for days and grocery shelves were stripped bare. Luckily the snow melted fast and all is now back to normal.

The second story is the cold economic data. Last Thursday the U.S. Census Bureau finally released its December retail sales data, which showed the sharpest drop in a decade. Headline retail sales dropped 1.2% month-over-month, far worse than the 0.2% increase economists anticipated. Retail numbers were weak across the board. Even the “control” category of sales, which strips out items including cars, gas, building materials and food services, reported the poorest reading since 2001. Also on Thursday, Germany’s 4th quarter GDP came out at 0.0%, just above the negative reading in the 3rd quarter. The economic engine of Europe is at stall speed. Finally, on Friday January’s industrial production numbers came in far weaker than expectations. All in all, it was a chilly end to the economic week, leaving the markets to worry about economic prospects in 2019.

So, what is the common thread between these stories? Snow melts fast in Seattle’s temperate climate, and weak economic news should soon dissipate as the U.S. is still growing above trend, unemployment is at generational lows and the Fed is patient. As for your portfolios, we know despite the vagaries of weekly economic data that the overall trend for economic growth is weakening, so we will maintain our conservative risk positioning.

Sources: Bloomberg, The Financial Times, The U.S. Census Bureau