THE BASIS POINT

Ineffective Monetary Policy. Waning Retail Sales.

FOMC
The FOMC meeting started today. What is interesting is that “regular” monetary policy – the setting of short-term rates and money supply has been ineffective over the past few years. Post-Lehman it was only the massive liquidity interventions of the Fed which kept the recession from becoming much worse. Increased money supply and low rates have done little to help GDP since then.

Retail
-ICSC-Goldman Chain Store Sales, Week/Week -1.4 %
-ICSC-Goldman Chain Store Sales, Year/Year +2.8 %. Previous was +3.0%
-Redbook Chain Store Sales Year/Year +2.5%. Previous was +2.8%

This year is not starting well. The Consumer Metrics Absolute Demand Index (this measures online discretionary spending) remains soft. It moved upward nicely last June-July giving hope that the consumer would lead the way to GDP growth but the index has waned since then. The question is just how well this index forecasts GDP. If the Consumer Metrics Index is an accurate forecast of GDP then 4Q2011 will report worse than anticipated.