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Charts Indicating Economic Weakness – December 2017

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 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.  The Gross Domestic Product Q3 2017 Second Estimate (pdf) of November 29, 2017 was 3.1%, and as seen in the November 2017 Wall Street Journal Economic Forecast Survey the consensus among various economists is for 2.5% GDP growth in 2017 & 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.

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each:

Total Private Construction Spending

Various measures of construction continue to show weak growth and/or contraction.

Shown below is “Total Private Construction Spending,” through October with last value of $949,946 Million, displayed on a “Percent Change From Year Ago” basis with value 3.2%, last updated December 1, 2017:

Total Private Construction Spending

source:  U.S. Bureau of the Census, Total Private Construction Spending [TLPRVCONS], retrieved from FRED, Federal Reserve Bank of St. Louis accessed December 6, 2017:

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

Total Federal Receipts

“Total Federal Receipts” growth continues to be intermittent in nature.

Shown below is “Total Federal Receipts,” through October with last value of $235,341 Million, displayed on a “Percent Change From Year Ago” basis with value 6.2%, last updated November 13, 2017:

Total Federal 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 December 6, 2017:

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

Manufacturer’s New Orders – Durable Goods

Shown below is “Manufacturer’s New Orders -Durable Goods,” through October with last value of $237,375 Million, displayed on a “Percent Change From Year Ago” basis with value 1.6%, last updated December 4, 2017:

Durable Goods New Orders Percent Change From Year Ago

source:  U.S. Bureau of the Census, Manufacturers’ New Orders: Durable Goods [DGORDER], retrieved from FRED, Federal Reserve Bank of St. Louis December 6, 2017:

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

Commercial And Industrial Loans, All Commercial Banks

Shown below is “Commercial And Industrial Loans, All Commercial Banks” through October with last value of $2,122.6193 Billion, displayed on a “Percent Change From Year Ago” basis with value of 1.2%, last updated December 1, 2017:

Commercial And Industrial Loans Percent Change From Year Ago

source:  Board of Governors of the Federal Reserve System (US), Commercial and Industrial Loans, All Commercial Banks [BUSLOANS], retrieved from FRED, Federal Reserve Bank of St. Louis December 6, 2017:

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

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 above-stated reservations regarding the “yield curve” as an indicator, I do believe that it should be monitored.

Below is a yield-curve proxy chart showing the spread between the 10-Year Treasury and 2-Year Treasury using constant maturity securities.  This daily chart is from June 1, 1976 through December 7, 2017, with recessionary periods shown in gray. This chart shows a value of .57%:

T10Y2Y_12-8-17

source:  Federal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity [T10Y2Y], retrieved from FRED, Federal Reserve Bank of St. Louis December 10, 2017:

https://research.stlouisfed.org/fred2/series/T10Y2Y

Population Growth

Shown below is a long-term chart of population growth on a “Percent Change From A Year Ago” basis with value .7%.  The declining nature of the growth rate is notable and may in itself may deserve consideration as an economic indicator:

Total Population Percent Change From Year Ago

source:  U.S. Bureau of the Census, Total Population: All Ages including Armed Forces Overseas [POP], retrieved from FRED, Federal Reserve Bank of St. Louis December 10, 2017:

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2659.99 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 = $26.55):

(click on chart to enlarge image)(chart last updated 12-8-17)

CES0500000003

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 December 8, 2017:

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 12-8-17)

CES0500000003 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 = $22.24):

(click on chart to enlarge image)(chart last updated 12-8-17)

AHETPI

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 December 8, 2017:

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 12-8-17)

AHETPI 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 2647.03 this post is written

Total Household Net Worth As Of 3Q 2017 – Two Long-Term Charts

In the last post (“Total Household Net Worth As A Percent Of GDP 3Q 2017“) I displayed a long-term chart depicting Total Household Net Worth as a percentage of GDP.

For reference purposes, here is Total Household Net Worth from a long-term perspective (from 1945:Q4 through 2017:Q3).  The last value (as of the December 7, 2017 update) is $96.93918 Trillion:

(click on each chart to enlarge image)

U.S. Total Household Net Worth

Also of interest is the same metric presented on a “Percent Change from a Year Ago” basis:

Total Household Net Worth Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Board of Governors of the Federal Reserve System; accessed December 7, 2017:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2636.98 as this post is written

Total Household Net Worth As A Percent Of GDP 3Q 2017

The following chart is from the CalculatedRisk post of December 7, 2017 titled “Fed’s Flow of Funds:  Household Net Worth increased in Q3.” It depicts Total Household Net Worth as a Percent of GDP.  The underlying data is from the Federal Reserve’s Z.1 report, “Financial Accounts of the United States“:

(click on chart to enlarge image)

Household net worth as a percentage of GDP

As seen in the above-referenced CalculatedRisk post:

The net worth of households and nonprofits rose to $96.9 trillion during the third quarter of 2017. The value of directly and indirectly held corporate equities increased $1.1 trillion and the value of real estate increased $0.4 trillion.

also:

The Fed estimated that the value of household real estate increased to $24.2 trillion in Q3. The value of household real estate is now above the bubble peak in early 2006 – but not adjusted for inflation, and this also includes new construction.

As I have written in previous posts concerning this Household Net Worth (as a percent of GDP) topic:

As one can see, the first outsized peak was in 2000, and attained after the stock market bull market / stock market bubbles and economic strength.  The second outsized peak was in 2007, right near the peak of the housing bubble as well as near the stock market peak.

also:

I could extensively write about various interpretations that can be made from this chart.  One way this chart can be interpreted is a gauge of “what’s in it for me?” as far as the aggregated wealth citizens are gleaning from economic activity, as measured compared to GDP.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2636.98 as this post is written

Money Supply Charts Through October 2017

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 November 27, 2017 depicting data through October 2017, with a value of $15,163.2 Billion:

MZMSL

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 4.7%:

MZMSL Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 30, 2017:

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 November 24, 2017, depicting data through October 2017, with a value of $13,747.0 Billion:

M2SL

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 5.0%:

M2SL Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 30, 2017:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2649.76 as this post is written

Consumer Confidence Surveys – As Of November 28, 2017

Doug Short had a blog post of November 28, 2017 (“Consumer Confidence Remains at 17 Year High“) in which he presents 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

University of Michigan Consumer Sentiment

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 2620.47 as this post is written

Durable Goods New Orders – Long-Term Charts Through October 2017

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 October 2017, updated on November 22, 2017. This value is $236,006 ($ 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:

Durable Goods New Orders 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 November 22, 2017;

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 2597.47 as this post is written

Charts Indicating Economic Weakness – November 2017

Throughout this site there are many discussions of economic indicators.  At this time, the readings of various indicators are especially notable.

While many U.S. economic indicators – including GDP – are indicating economic growth, others depict (or imply) various degrees of weak growth or economic contraction.

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each:

Overall Economic Activity

While the Gross Domestic Product Q3 2017 Advance Estimate (pdf) of October 27, 2017 was 3.0%, and as seen in the November 2017 Wall Street Journal Economic Forecast Survey the consensus among various economists is for 2.5% GDP growth in 2017 & 2018, 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.

Among the broad-based economic indicators that have been implying weaker growth or mild contraction is the Chicago Fed National Activity Index (CFNAI).

The Chicago Fed National Activity Index (CFNAI) updated as of October 23, 2017:

The CFNAI, with the October 23, 2017 reading of .17:

CFNAI 10-23-17 .17

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, November 16, 2017;

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

An ancillary measure of the Chicago Fed National Activity Index (CFNAI) – the Chicago Fed National Activity Diffusion Index (CFNAIDIFF) – updated as of October 23, 2017:

The CFNAIDIFF, with current reading of -.19:

CFNAIDIFF 10-23-17 -.19

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index:  Diffusion Index [CFNAIDIFF], retrieved from FRED, Federal Reserve Bank of St. Louis, November 16, 2017;

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

Rail Freight Carloads

Another notable measure is that of “Rail Freight Carloads,” as depicted below, through September with last value of 1,086,482, last updated November 16, 2017:

Rail Freight Carloads

source:  U.S. Bureau of Transportation Statistics, Rail Freight Carloads [RAILFRTCARLOADSD11], retrieved from FRED, Federal Reserve Bank of St. Louis;  November 16, 2017:

https://fred.stlouisfed.org/series/RAILFRTCARLOADSD11

Here is the same measure on a “Percent Change From Year Ago” basis:

Rail Freight Carloads Percent Change From Year Ago

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 above-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 November 17, 2017.  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 November 17, 2017 closing value of .62%.  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)

U.S. Yield Curve proxy

Domestic Auto Production

Another notable measure is that of “Domestic Auto Production,” defined in FRED as:

Domestic auto production is defined as all autos assembled in the U.S.

Here is “Domestic Auto Production,” depicted below on a “Percent Change From Year Ago” basis, through September with last value of -34.2 Percent, last updated October 30, 2017:

U.S. Domestic Auto Production Percent Change From Year Ago

source:  U.S. Bureau of Economic Analysis, Domestic Auto Production [DAUPSA], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed November 15, 2017:

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

Inflation/Deflation Trends

Current inflation levels and the possibility of deflation  is a vastly complex topic, and as such isn’t suitably discussed in a brief manner.  I have discussed the issue of deflation extensively as I continue to believe that prolonged and deep U.S. deflationary conditions are on the horizon, and that such deflationary conditions will cause, as well as accompany, inordinate economic hardship. [note: to clarify, for purposes of this discussion, when I mention “deflation” I am referring to the CPI going below zero. Also, I have been using the term “deflationary pressures” as a term to describe deflationary manifestations within an environment that is still overall inflationary but heading towards deflation.]

My latest commentary regarding deflationary pressures and future deflation can be found in the October 2 post titled “Charts Indicating Economic Weakness – October 2017.”

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 2578.85 as this post is written

Walmart’s Q3 2018 Results – Comments

I found various notable items in Walmart’s Q3 2018 management call transcript (pdf) dated November 16, 2017.  (as well, there is Walmart’s press release of the Q3 results and related presentation materials)

I view Walmart’s results and comments as particularly noteworthy given their retail prominence and focus on low prices.  I have previously commented on their quarterly management call comments; these previous posts are found under the “paycheck to paycheck” tag.

Here are various excerpts that I find most notable:

comments from Doug McMillon, President and CEO, page 4, wrt Walmart U.S.: 

We had a strong quarter with comp-sales growth of 2.7 percent and
comp traffic growth of 1.5 percent. While we recognize that there are some
incremental hurricane-related sales in these numbers, our core business is
performing well.

comments from Doug McMillon, President and CEO, page 4, wrt Walmart U.S.: 

Walmart U.S. eCommerce sales were up 50 percent this quarter, with
the majority of the increase through Walmart.com. Existing customers have
become advocates for popular initiatives like online grocery and free twoday
shipping, and as a result, new customers, suppliers and partnerships
are coming to Walmart. The expanded assortment on Walmart.com has
also contributed to growth. Over the past year, we’ve tripled the number of
items on Walmart.com to reach more than 70 million SKUs today. As you
heard last month, Marc’s team is making progress on hiring additional
category specialists focused on improving the customer experience and our
positioning with the top one million eCommerce items. The recent
agreement with Lord and Taylor is a great example of how we will be
creating specialty experiences that complement what we offer and serve
customers with the brands they want. We’re making good progress
attracting premium brands to the site such as KitchenAid and Bose.

comments from Brett Biggs, EVP & CFO, page 7:

We expect top line growth going forward to be led more by comp
sales and eCommerce with less emphasis on new units in the U.S. We
have good sales momentum and cost transformation is gaining traction.
This gives us confidence in our ability to operate with discipline and
leverage expenses. In terms of capital allocation, we’re prioritizing
eCommerce, technology, supply chain and store remodels over new stores
and clubs, which we believe will contribute to long-term value creation for
shareholders. We’re excited about the future of Walmart.

comments from Brett Biggs, EVP & CFO, page 9:

Walmart U.S. eCommerce continued its strong performance with net
sales growth of 50 percent. We began to lap the acquisition of Jet.com
mid-quarter, which impacted our overall growth. Walmart.com, including
online grocery, once again led the way and was responsible for the majority
of the growth in the period. Throughout this year we’ve talked a lot about
the speed at which we’re moving, and we continued that progress in the
third quarter. For example, we launched new partnerships with Google and
August Home – these are capital-light initiatives that expand convenience
for customers by enabling hands free voice shopping and unattended
delivery in the home. We also acquired Parcel, a technology-based, sameday,
last-mile delivery company focused on customers in New York City.

comments from Brett Biggs, EVP & CFO, page 10, wrt Walmart U.S.:  

Walmart U.S. had a strong quarter with comp sales growth of 2.7
percent led by a traffic increase of 1.5 percent. While difficult to quantify
precisely, we estimate hurricane-related impacts benefited comps by 30 to
50 basis points. On a two-year stacked basis, comp sales were up 3.9
percent and comp traffic increased 2.2 percent. This is the strongest
quarterly and two-year stacked comp performance in more than eight
years. The food business continued to accelerate with sales, traffic and
unit growth across categories. In fact, food categories delivered the
strongest quarterly comp sales performance in almost six years. Market
inflation was around or slightly less than what we saw in the second
quarter. All formats had positive comps and eCommerce contributed
approximately 80 basis points to the segment.

Gross margin rate declined 36 basis points in the quarter. The
margin rate decreased in part due to the continued execution of our price
investment strategy and the mix effects from our growing eCommerce
business. In addition, we estimate that hurricane-related impacts were
about one-third of the overall decline.

Operating expenses as a percentage of net sales decreased 10 basis
points, with stores leveraging at a higher level than that. The U.S. team
has made great progress while maintaining high customer service levels,
as associates are more efficient with improved technology, training and
processes.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2564.62 as this post is written

The S&P500 And 10-Year Treasury Yields Since 1980

As reference, here is a long-term chart of the S&P500 (top plot) and 10-Year U.S. Treasury yield (bottom plot) since 1980, depicted on a monthly basis through the November 10, 2017 closing values:

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

S&P500 And 10-Year U.S. Treasury Yields

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2581.90 as this post is written