Doubts Over US Economic Data
The CEO of DoubleLine Capital, Jeffrey Gundlach, has expressed his concerns over the reliability of the US government’s economic data. In a recent interview with Bloomberg Television, Gundlach stated that the data used by the Federal Reserve to determine interest rates is full of estimates and appears to be largely fabricated.
Questionable Data
Gundlach pointed out that the Consumer Price Index (CPI), which tracks the cost of a basket of goods, and jobs reports are filled with estimates. He noted that only 60% of surveys sent out for the jobs report are being responded to, and this number has been rising over time. Additionally, the CPI data is becoming increasingly suspect, with 35% of input prices being estimated, up from 8% several years ago.
Impact on Interest Rates
The recent jobs report showed a significant slowdown in job growth, with only 73,000 jobs added last month, short of the expected 100,000. This, combined with drastic revisions to previous job numbers, has led some to suspect that the US economy is suddenly flashing a recession. Gundlach believes that the Fed will likely cut interest rates at its next meeting in September, and may make at least one other cut before the year’s end.
Predictions for Interest Rate Cuts
Gundlach thinks it’s a virtual certainty that the Fed will cut interest rates, and markets are pricing in the possibility of up to three rate cuts this year. However, he remains skeptical of this and believes that two rate cuts maximum are more likely. Despite the weakening data, he still thinks that his base case of two rate cuts this year is the most probable outcome.
Conclusion
The reliability of the US government’s economic data has become a topic of concern, with estimates and fabricated numbers potentially influencing the Federal Reserve’s decision-making. As the economy continues to slow down, it’s likely that interest rates will be cut to stimulate growth. However, the uncertainty surrounding the data makes it difficult to predict the exact course of action the Fed will take. One thing is certain, though – the upcoming interest rate decisions will have a significant impact on the US economy, and it’s essential to keep a close eye on the developments.
