Category Archives: Uncategorized

Disturbing Charts (Update 31)

I find the following charts to be disturbing.   These charts would be disturbing at any point in the economic cycle; that they (on average) depict such a tenuous situation now – 109 months after the official (as per the September 20, 2010 NBER BCDC announcement) June 2009 end of the recession – is especially notable.

These charts raise a lot of questions.  As well, they highlight the “atypical” nature of our economic situation from a long-term historical perspective.

All of these charts are from the Federal Reserve, and represent the most recently updated data.

(click on charts to enlarge images)

Housing starts (last updated June 19, 2018):

Housing Starts

US. Bureau of the Census, Housing Starts: Total: New Privately Owned Housing Units Started [HOUST], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/HOUST/, July 13, 2018.

The Federal Deficit (last updated March 27, 2018):

Federal Deficit

US. Office of Management and Budget, Federal Surplus or Deficit [-] [FYFSD], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYFSD/, July 13, 2018.

Federal Net Outlays (last updated March 27, 2018):

Federal Net Outlays

US. Office of Management and Budget, Federal Net Outlays [FYONET], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYONET/, July 13, 2018.

State & Local Personal Income Tax Receipts (% Change from Year Ago)(last updated March 28, 2018):

ASLPITAX_3-28-18 407.037 6.2 Percent Change From Year Ago

US. Bureau of Economic Analysis, State and local government current tax receipts: Personal current taxes: Income taxes [ASLPITAX], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/ASLPITAX/, July 13, 2018.

Total Loans and Leases of Commercial Banks (% Change from Year Ago)(last updated July 6, 2018):

TOTLL_7-6-18

Board of Governors of the Federal Reserve System (US), Loans and Leases in Bank Credit, All Commercial Banks [TOTLL], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTLL/, July 13, 2018.

Bank Credit – All Commercial Banks (% Change from Year Ago)(last updated July 6, 2018):

TOTBKCR_7-6-18 4.2 Percent Change From Year Ago

Board of Governors of the Federal Reserve System (US), Bank Credit of All Commercial Banks [TOTBKCR], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTBKCR/, July 13, 2018.

M1 Money Multiplier (last updated July 12, 2018):

M1 Money Multiplier

Federal Reserve Bank of St. Louis, M1 Money Multiplier [MULT], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/MULT/, July 13, 2018.

Median Duration of Unemployment (last updated July 6, 2018):

Median Duration of Unemployment

US. Bureau of Labor Statistics, Median Duration of Unemployment [UEMPMED], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/UEMPMED/, July 6, 2018.

Labor Force Participation Rate (last updated July 6, 2018):

Labor Force Participation Rate

US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [CIVPART], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CIVPART/, July 15, 2018.

The Chicago Fed National Activity Index (CFNAI) 3-month moving average (CFNAI-MA3)(last updated June 25, 2018):

CFNAIMA3_6-25-18 .18

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CFNAIMA3/, June 25, 2018.

I will continue to update these charts on an intermittent basis as they deserve close monitoring…

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2801.31 as this post is written

Charts Indicating Economic Weakness – July 2018

U.S. Economic Indicators

Throughout this site there are many discussions of economic indicators.  At this time, the readings of various indicators are especially notable.  This post is the latest in a series of posts indicating U.S. economic weakness or a notably low growth rate.

While many U.S. economic indicators – including GDP – are indicating economic growth, others depict (or imply) various degrees of weak growth or economic contraction.  As seen in the July 2018 Wall Street Journal Economic Forecast Survey the consensus (average estimate) among various economists is for 2.9% GDP growth in 2018.  However,  there are other broad-based economic indicators that seem to imply a weaker growth rate.

As well, it should be remembered that GDP figures can be (substantially) revised.

Charts Indicating U.S. Economic Weakness

Below are a small sampling of charts that depict weak growth or contraction, and a brief comment for each:

Total Federal Receipts

“Total Federal Receipts” growth continues to be intermittent in nature since 2015.  As well, the level of growth does not seem congruent to the (recent) levels of economic growth as seen in aggregate measures such as Real GDP.

“Total Federal Receipts” through June had a last value of $316,278 Million.  Shown below is  the measure displayed on a “Percent Change From Year Ago” basis with value -6.6%, last updated July 12, 2018:

MTSR133FMS

source:  U.S. Department of the Treasury. Fiscal Service, Total Federal Receipts [MTSR133FMS], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed July 12, 2018:

https://fred.stlouisfed.org/series/MTSR133FMS

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The Yield Curve

Many people believe that the Yield Curve is a leading economic indicator for the United States economy.

On March 1, 2010, I wrote a post on the issue, titled “The Yield Curve As A Leading Economic Indicator.”

While I continue to have the stated reservations regarding the “yield curve” as an indicator, I do believe that it should be monitored.

As an indication of the yield curve (i.e. a yield curve proxy), below is a weekly chart from January 1, 1990 through July 11, 2018.  The top two plots show the 10-Year Treasury and 2-Year Treasury yields.  The third plot shows the (yield) spread between the 10-Year Treasury and 2-Year Treasury, with the July 11, 2018 closing value of .27%.  The bottom plot shows the S&P500:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

Yield Curve proxy

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U.S. Auto Sales

U.S. auto sales have experienced significant growth over the post-2009 period as seen in the chart shown below. The current reading (through June) is 17.381 million vehicles SAAR.  Of great economic importance is whether auto sales have peaked, which I believe has occurred, as well as other problematical characteristics of the light vehicle market.  A long-term chart is shown below:

Light Weight Vehicle Sales: Autos and Light Trucks

source:  U.S. Bureau of Economic Analysis, Light Weight Vehicle Sales: Autos and Light Trucks [ALTSALES], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed July 10, 2018:

https://fred.stlouisfed.org/series/ALTSALES

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Vehicle Miles Traveled

I find the flagging growth trend in the “Vehicle Miles Traveled” (NSA) measure since 2015 to be notable.

“Vehicle Miles Traveled” through April had a last value of 272,442 Million.  Shown below is  the measure displayed on a “Percent Change From Year Ago” basis with value -.2%, last updated July 2, 2018:

TRFVOLUSM227NFWA_7-2-18 -.2 Percent Change From Year Ago

source:   U.S. Federal Highway Administration, Vehicle Miles Traveled [TRFVOLUSM227NFWA], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed July 12, 2018:

https://fred.stlouisfed.org/series/TRFVOLUSM227NFWA

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Alternate Growth Trend Measures

Another facet of economic activity is seen in the ratio of the Conference Board’s Coincident Composite Index to the Lagging Composite Index.  I interpret the trends seen in this measure to be disconcerting, as the ratio has generally been sinking for years:

Conference Board Coincident To Lagging Ratio

source:  Haver’s June 21, 2018 post (“U.S. Leading Economic Indicators’ Rate of Increase Eases“)

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Other Indicators

As mentioned previously, many other indicators discussed on this site indicate economic weakness or economic contraction, if not outright (gravely) problematical economic conditions.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2798.29 as this post is written

Average Hourly Earnings Trends

I have written many blog posts concerning the worrisome trends in income and earnings.

Along these lines, one of the measures showing disconcerting trends is that of hourly earnings.

While the concept of hourly earnings can be defined and measured in a variety of ways, below are a few charts that I believe broadly illustrate problematic trends.

The first chart depicts Average Hourly Earnings Of All Employees: Total Private (FRED series CES0500000003)(current value = $26.98):

(click on chart to enlarge image)(chart last updated 7-6-18)

CES0500000003_7-6-18 26.98

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of All Employees:  Total Private [CES0500000003] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed July 6, 2018:

http://research.stlouisfed.org/fred2/series/CES0500000003

This next chart depicts this same measure on a “Percentage Change From A Year Ago” basis.   While not totally surprising, I find the decline from 2009 and subsequent trend to be disconcerting:

(click on chart to enlarge image)(chart last updated 7-6-18)

CES0500000003_7-6-18 26.98 2.7 Percent Change From Year Ago

There are slightly different measures available from a longer-term perspective. Pictured below is another measure, the Average Hourly Earnings of Production and Nonsupervisory Employees – Total Private (FRED series AHETPI)(current value = $22.62):

(click on chart to enlarge image)(chart last updated 7-6-18)

AHETPI_7-6-18 22.62

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of Production and Nonsupervisory Employees:  Total Private [AHETPI] ; U.S. Department of Labor: Bureau of Labor Statistics;  accessed July 6, 2018:

http://research.stlouisfed.org/fred2/series/AHETPI

Pictured below is this AHETPI measure on a “Percentage Change From A Year Ago” basis.   While not totally surprising, I find the decline from 2009 and subsequent trend to be disconcerting:

(click on chart to enlarge image)(chart last updated 7-6-18)

AHETPI_7-6-18 22.62 2.7 Percent Change From Year Ago

I will continue to actively monitor these trends, especially given the post-2009 dynamics.

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2761.07 this post is written

Comment Regarding The 2% Target On The Core PCE Price Index

In previous commentaries I have noted the continual shortfall between the Federal Reserve’s stated inflation target (2% (percent change from year ago) on the (Core) PCE Price Index) and the actual readings.  For years there has been a continued inability for this 2% inflation target to be achieved, which is highly notable.

However, as seen in the Wall Street Journal article of June 29, 2018, titled “Inflation Is Here, What Will The Fed Do About It?,” this 2% target has recently been achieved.

An excerpt from the article:

The Commerce Department on Friday reported that its measure of consumer prices rose 0.2% in May from April, putting it 2.3% above its year-earlier level. More important, core prices, which the Fed follows closely, were up 2% on the year. That marked the first time core inflation, which excludes food and energy to better capture inflation’s trend, reached 2% since April 2012.

Below is a chart of the U.S. Core PCE Price Index, which shows the YoY reading to be at 2% (rounded up from 1.95526%) as of the June 29, 2018 update.  Of note, while this Index reading was above 2% in late 2011 and early 2012, the duration of such was only roughly 6 months.

Here is a long-term chart showing the readings since the year 2000:

Core PCE Price Index YoY

source:  U.S. Bureau of Economic Analysis, Personal Consumption Expenditures Excluding Food and Energy (Chain-Type Price Index) [PCEPILFE], retrieved from FRED, Federal Reserve Bank of St. Louis on July 5, 2018:

https://fred.stlouisfed.org/series/PCEPILFE

As discussed in various posts regarding deflation, as well as other recent commentaries,  I continue to believe that significant (in extent and duration) U.S. deflation (as defined by when the CPI goes below zero) is on the horizon.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2721.48 as this post is written

Consumer Confidence Surveys – As Of June 29, 2018

Doug Short’s site had a post of June 29, 2018 (“Michigan Consumer Sentiment:  June Final Retreats Slightly“) that displays the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:

(click on charts to enlarge images)

Conference Board Consumer Confidence Index

University of Michigan Consumer Sentiment Index

There are a few aspects of the above charts that I find highly noteworthy.  Of course, until the sudden upswing in 2014, the continued subdued absolute levels of these two surveys was disconcerting.

Also, I find the “behavior” of these readings to be quite disparate as compared to the other post-recession periods, as shown in the charts between the gray shaded areas (the gray areas denote recessions as defined by the NBER.)

While I don’t believe that confidence surveys should be overemphasized, I find these readings to be very problematical, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2736.95 as this post is written

Broad-Based Indicators Of Economic Activity

The Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index) are two broad-based economic indicators that I regularly feature in this site.

The short-term and long-term trends of each continue to be notable.

The post on the Doug Short site of June 28, 2018, titled “The Philly Fed ADS Index Business Conditions Index Update” displays both the CFNAI MA-3 (3-month Moving Average) and ADS Index (91-Day Moving Average) from a variety of perspectives.

Of particular note, two of the charts, shown below, denote where the current levels of each reading is relative to the beginning of past recessionary periods, as depicted by the red dots.

The CFNAI MA-3:

(click on charts to enlarge images)

CFNAIMA3

The ADS Index, 91-Day MA:

ADS Index 91dma

Also shown in the aforementioned post is a chart of each with a long-term trendline (linear regression) as well as a chart depicting GDP for comparison purposes.

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2716.31 as this post is written

Durable Goods New Orders – Long-Term Charts Through May 2018

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.

For reference, below are two charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through May 2018, updated on June 27, 2018. This value is $248,755 ($ Millions):

(click on charts to enlarge images)

Durable Goods New Orders

Second, here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis:

DGORDER Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Manufacturers’ New Orders:  Durable Goods [DGORDER]; U.S. Department of Commerce: Census Bureau; accessed June 27, 2018;

http://research.stlouisfed.org/fred2/series/DGORDER

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2699.63 as this post is written

Money Supply Charts Through May 2018

For reference purposes, below are two sets of charts depicting growth in the money supply.

The first shows the MZM (Money Zero Maturity), defined in FRED as the following:

M2 less small-denomination time deposits plus institutional money funds.
Money Zero Maturity is calculated by the Federal Reserve Bank of St. Louis.

Here is the “MZM Money Stock” (seasonally adjusted) chart, updated on June 22, 2018 depicting data through May 2018, with a value of $15,427.5 Billion:

MZMSL

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 3.7%:

MZMSL_6-22-18 15427.5 3.7 Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed June 25, 2018:

https://research.stlouisfed.org/fred2/series/MZMSL

The second set shows M2, defined in FRED as the following:

M2 includes a broader set of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts, or MMDAs); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money market mutual funds (MMMFs). Seasonally adjusted M2 is computed by summing savings deposits, small-denomination time deposits, and retail MMMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.

Here is the “M2 Money Stock” (seasonally adjusted) chart, updated on June 21, 2018, depicting data through May 2018, with a value of $14,024.2 Billion:

M2SL

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 3.8%:

M2SL_6-21-18 14024.2 3.8 Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed June 25, 2018:

https://research.stlouisfed.org/fred2/series/M2SL

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2754.88 as this post is written

Markets During Periods Of Federal Reserve Intervention – June 15, 2018 Update

In the August 9, 2011 post (“QE3 – Various Thoughts“) I posted a chart that depicted the movements of the S&P500, 10-Year Treasury Yield and the Fed Funds rate spanning the periods of various Federal Reserve interventions since 2007.

For reference purposes, here is an updated chart (through June 15, 2018) from the Doug Short site post of June 15 (“Treasury Snapshot:  10-Year Remains at 2.93%“):

The S&P500 during Federal Reserve intervention

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2779.66 as this post is written

Charts Indicating Economic Weakness – June 2018

U.S. Economic Indicators

Throughout this site there are many discussions of economic indicators.  At this time, the readings of various indicators are especially notable.  This post is the latest in a series of posts indicating U.S. economic weakness or a notably low growth rate.

While many U.S. economic indicators – including GDP – are indicating economic growth, others depict (or imply) various degrees of weak growth or economic contraction.  As seen in the June 2018 Wall Street Journal Economic Forecast Survey the consensus (average estimate) among various economists is for 2.9% GDP growth in 2018.  However,  there are other broad-based economic indicators that seem to imply a weaker growth rate.

As well, it should be remembered that GDP figures can be (substantially) revised.

Charts Indicating U.S. Economic Weakness

Below are a small sampling of charts that depict weak growth or contraction, and a brief comment for each:

Total Federal Receipts

“Total Federal Receipts” growth continues to be intermittent in nature since 2015.  As well, the level of growth does not seem congruent to the (recent) levels of economic growth as seen in aggregate measures such as Real GDP.

“Total Federal Receipts” through May had a last value of $217,075 Million.  Shown below is  displayed on a “Percent Change From Year Ago” basis with value -9.7%, last updated June 12, 2018:

Monthly Treasury Receipts Percent Change From Year Ago

source:  U.S. Department of the Treasury. Fiscal Service, Total Federal Receipts [MTSR133FMS], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed June 13, 2018:

https://fred.stlouisfed.org/series/MTSR133FMS

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Underperformance Of Consumer Staples Stocks

In the March 23, 2017 post (“‘Hidden’ Weakness In Consumer Spending?“) I wrote of various indications that consumer spending may be (substantially) less than what is depicted by various mainstream indicators, including overall retail sales.

One recent development that appears to be a problematical aspect of consumer spending is the performance of the consumer staples stocks.  As one can see in the chart below, there has been a marked relative weakness in these stocks (with the XLP serving as a proxy).  The chart shows a 10-year daily depiction of the XLP (top plot), the S&P500 (middle plot) and XLP:S&P500 ratio (bottom plot.)  While there can be various interpretations and reasons for this underperformance, it does appear to represent a “red flag” especially considering other problematical indications concerning consumer spending:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

XLP v S&P500 chart

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Unemployment

I have written extensively concerning unemployment, as the current and future unemployment issue is of tremendous importance.

The consensus belief is that employment is robust, citing total nonfarm payroll growth and the current unemployment rate of 3.8%.  However, my analyses continue to indicate that the conclusion that employment is strong is incorrect.  While the unemployment rate indicates that unemployment is (very) low, closer examination indicates that this metric is, for a number of reasons, highly misleading.

My analyses indicate that the underlying dynamics of the unemployment situation remain exceedingly worrisome, especially with regard to the future.  These dynamics are numerous and complex, and greatly lack recognition and understanding, especially as how from an “all-things-considered” standpoint they will evolve in an economic and societal manner.  I have recently written of the current and future U.S. employment situation on the “U.S. Employment Trends” page.

While there are many charts that can be shown, one that depicts a worrisome trend is the  Civilian Labor Force Participation Rate for those with a Bachelor’s Degree and Higher, 25 years and over.  Among disconcerting aspects of this measure is the long-term (most notably the post-2009) trend, especially given this demographic segment.

The current value as of the June 1, 2018 update (reflecting data through the May employment report) is 74.1%:

Civilian Labor Force Participation Rate: Bachelor's Degree and Higher, 25 years and over

source:  U.S. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: Bachelor’s Degree and Higher, 25 years and over [LNS11327662], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed June 11, 2018:

https://fred.stlouisfed.org/series/LNS11327662

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Loan Demand And Related Measures

As seen in previous updates, various aspects of lending growth and related measures have shown a marked slowing in the growth rate.  Here is a measure, Net Percentage of Domestic Banks Reporting Stronger Demand for Commercial and Industrial Loans from Large and Middle-Market Firms, that shows a decline:

Net Percentage of Domestic Banks Reporting Stronger Demand for Commercial and Industrial Loans from Large and Middle-Market Firms

source:  Board of Governors of the Federal Reserve System (US), Net Percentage of Domestic Banks Reporting Stronger Demand for Commercial and Industrial Loans from Large and Middle-Market Firms [DRSDCILM], retrieved from FRED, Federal Reserve Bank of St. Louis;  accessed June 11, 2018:

https://fred.stlouisfed.org/series/DRSDCILM

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Wages And Earnings

The level and growth rates of wages and household earnings continues to be (highly) problematical.  I have extensively discussed these worrisome trends in income and earnings.

As seen in many measures the problem is chronic (i.e long-term) in nature.

Shown below is a chart depicting the 12-month percent change in real average hourly and weekly earnings for private sector employees from January 2008 – April 2018.  As seen in the chart, growth in this measure over the time period depicted has been intermittent, volatile, and, especially since 2017, weak:

 12-month percent change in real average hourly and weekly earnings

source: Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, Real average hourly earnings up 0.2 percent for all private employees from April 2017 to April 2018 on the Internet at https://www.bls.gov/opub/ted/2018/real-average-hourly-earnings-up-0-point-2-percent-for-all-private-employees-april-2017-to-april-2018.htm(visited June 11, 2018).

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Other Indicators

As mentioned previously, many other indicators discussed on this site indicate economic weakness or economic contraction, if not outright (gravely) problematical economic conditions.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2786.85 as this post is written