US economic recovery – still strong or losing momentum

Recent faltering in economic dockets has raised debates, whether the US economy can still bolster stronger recovery.

• It is a fact that some of the economic dockets have deteriorated compared to prior. US GDP grew at 2.2%, lower than expected 2.4% in the fourth quarter.
  
  
• Yesterday Dallas FED manufacturing business index deteriorated to -17.2 much lower than previous -11. Stronger dollar continue to pose headwinds for the economy.

However all is not just bad news.

• On the other hand, some of the dockets remained stronger than expected. Yesterday's release show that personal income grew at 0.4% better than expected and core PCE deflator remain well anchored in positive territory growing 1.4% YoY.

• Last week saw jobless claims to go down towards +282K, close to multi decade low.

To clear up things, let's focus on micro geographic level where slowdown is expected to be more visible. Texas is the oil hub of US and latest payroll report showed job losses in the petroleum sector, however that could be due to recent strike.

• Chart explains business cycle index for top metros in Texas. The index is constructed based on aggregated movements in local unemployment rate, Gross state product, inflation adjusted wages and inflation adjusted retail sales. Chart courtesy Dallas FED.
  
  
• The index increased in February, with another positive number. Index still growing in all 5 major metro politian area except for Houston.

Similar assessment over current indicators suggest that US is still growing, may not be at a neck break pace and economy might be strong enough to handle rate hikes by FED this year.

Dollar bulls seem to be taking note of such, pushing the dollar higher. However FED has enough room to push hike further, should the strength of dollar become a primary concern. Dollar index is trading at 98.6, up 0.68% today.