In 17 of the 19 times in the last 100 years that Industrial Production has contracted for 3 consecutive months, the US economy has entered recession. Today 0.7% drop YoY is the 3rd month of declines.

The only times in the last 100 years that 3 months of US Industrial Production contraction has not coincided with a recession was in 1934 and 1952... (and the current decline is larger than 1952's in aggregate)

While we have generally disagreed with Morgan Stanley's Adam Parker flipflopping on stocks some two years ago, or just as the market was topping out, we can't find fault with his latest note released today in which he openly admits that "our portfolio advice has been pretty horrendous lately. As my 90-year old Latin teacher used to tell the class in 1985, “son, you are in left field, without a glove, with the sun in your eyes."

Today's batch of housing data, namely the January update of housing starts and permits, which as a reminder has a quite substantial "confidence interval" of between 10.5% and 28.3%, was largely uneventful.

Producer Prices (ex food and energy) jumped 0.4% MoM - the biggest rise since Oct 2014 (and dramatically hotter than the 0.1% rise expected). Rubbing salt into Fed mandate wounds still further is last month's print was also revised higher and YoY (+0.6%) is the highest since Sep 2015. Across the range of PPI data, all items came hotter than expected in January (despite a 5% drop in Energy) with Food rising most.

Inflation hotting up...

The British government’s ‘crackdown’ on tax evasion has been embroiled in another credibility crisis, following revelations that the family business of Chancellor George Osborne had not paid corporation tax for seven years. A Shadow Treasury spokesman said that reports were ‘truly embarrassing’ for the Chancellor and the Labour party say that the tax row has casts doubt on his ability to make other firms pay up.