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“An economist,” said Laurence J. Peter*, “is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today”. Currency strategists are similar, but it usually takes only a few minutes to see our predictions go completely wrong. We’re not aware of anyone (economist or otherwise) who accurately forecast this morning’s 4.9-percent surge in third quarter gross domestic product back in July, yet we feel relatively confident in thinking that this outperformance won’t be repeated – and may even reverse – over the final three months of the year. Consumer spending growth through the summer months appears...

The legendary investor Charlie Munger likes to tell a story:“A teacher asks a class a question: There are 10 sheep in a pen. One jumps out, how many are left?”. Everyone but one boy says 9 are left. That one boy says “none are left”. The teacher says “you don’t understand arithmetic” and he says: “You don’t understand sheep.” This morning’s better-than-anticipated retail sales report helped boost the Atlanta Federal Reserve’s GDPNow nowcast estimate, with the updated model forecasting a 5.4-percent annualised expansion in real gross domestic product for the third quarter* – joining September’s blowout payrolls report and stubbornly-sticky...

This morning’s data is unlikely to shift the Federal Reserve’s stance on interest rates. With the bulk of the headline move coming from housing and energy, underlying dynamics are still pointing to a gradual moderation in price pressures over the months ahead.  But it did show that inflation prints retain the capacity for surprise, and will help maintain the risk premium – the degree of uncertainty expected around the future path of prices – that is currently built into long-term interest rates. This premium (which forms part of the broader term premium) is notoriously difficult to measure, but probability densities...