UNITED STATES   The Baker-Bloom-Davis index measures policy-related economic uncertainty from three types of underlying components. “One component quantifies newspaper coverage of policy-related economic uncertainty. A second component reflects the number of federal tax code provisions set to expire in future years. The third component uses disagreement among economic forecasters as a proxy for uncertainty.” The index gained attraction (and traction among investors) in 2011, when Baker-Bloom-Davis argued that uncertainty was chocking the recovery. After peaking in Nov/16 at the time of the elections, it has since declined to about its average level since 1985. This at a time when, admittedly, the recovery is doing well, however, uncertainty about the Fed (who will lead it?) and about the budget (what will be the impact of the tax reform?) is increasing and, arguably, introducing real unpredictability to forecasts. This week we get data on inflation and retail sales, two key components of the forecast. The controversy on inflation is endless. The NY-Fed has a measure of “underlying inflation”. Measured in yoy terms it reached a trough in Feb/16 (1.81%) and rose since, to 2.7% in Aug/17. This is of course well above the CPI or the PCE. Core CPI was at 1.7%yoy … Continue reading US + Brazil Financial News (10/9)