Commentary from my daily report, "The Fiscal Liquidity Index."
|(The Index is something that I created that tracks "net spending" by the government.)|
The Index was positive for the eighth consecutive day at 30.6, however, it was down slightly from Tuesday’s reading of 35.3. The raw (un-smoothed) index held steady at 27.8. Treasury had a gross deficit of $100.7 bln. You have to go all the way back to Mar 2011 to see a higher monthly gross deficit. Remember, deficits add to private sector financial balances, so this is definitely a positive development. Real net spending (total outlays adjusted for public debt redemptions) totaled $231.4 bln. That is $51.2 bln above last month so it is another piece of good news. It shows that net spending is quite strong and we know that positive net spending adds to demand. There is, however, one caveat. Employment tax receipts are trending down and are now running near the lowest level of the year when compared to the same period in 2011. And when you look at the data it seems to be suggesting that employment peaked on or around Jan 17. If so, it may be the first sign of economic weakness in what has generally been a pretty strong beginning of the year. The divergence indicator was 112.7, so the risk level remains orange.