Tag Archives: economic indicators

Updates Of Economic Indicators September 2017

Here is an update of various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts:

The September 2017 Chicago Fed National Activity Index (CFNAI) updated as of September 25, 2017:

The CFNAI, with current reading of -.31:

CFNAI_9-25-17 -.31

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, September 25, 2017;

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

The CFNAI-MA3, with current reading of -.04:

CFNAIMA3_9-25-17 -.04

The ECRI WLI (Weekly Leading Index):

As of September 22, 2017 (incorporating data through September 15, 2017) the WLI was at 143.4 and the WLI, Gr. was at 0%.

A chart of the WLI,Gr., from Doug Short’s ECRI update post of September 22, 2017:

ECRI WLI,Gr.

The Aruoba-Diebold-Scotti Business Conditions (ADS) Index:

Here is the latest chart, depicting the ADS Index from December 31, 2007 through September 16, 2017:

ADS Index

The Conference Board Leading (LEI), Coincident (CEI) Economic Indexes, and Lagging Economic Indicator (LAG):

As per the September 21, 2017 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in August” (pdf) the LEI was at 128.8, the CEI was at 115.8, and the LAG was 125.2 in August.

An excerpt from the release:

“The August gain is consistent with continuing growth in the U.S. economy for the second half of the year, which may even see a moderate pick up,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “While the economic impact of recent hurricanes is not fully reflected in the leading indicators yet, the underlying trends suggest that the current solid pace of growth should continue in the near term.”

Here is a chart of the LEI from Doug Short’s Conference Board Leading Economic Index update of September 21, 2017:

Conference Board LEI

_________

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 2492.49 as this post is written

Money Supply Charts Through August 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 September 22, 2017 depicting data through August 2017, with a value of $15,056.6 Billion:

MZMSL_9-22-17 15056.5

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 4.4%:

MZMSL_9-22-17 15056.5 4.4 Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 25, 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 September 21, 2017, depicting data through August 2017, with a value of $13,649.7 Billion:

M2SL_9-21-17 13649.7

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 5.3%:

M2SL_9-21-17 13649.7 5.3 Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 25, 2017:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2502.22 as this post is written

The Yield Curve – September 25, 2017

Many people believe that the Yield Curve is an important economic indicator.

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

An excerpt from that post:

On the NY Fed link above, they have posted numerous studies that support the theory that the yield curve is a leading indicator.   My objections with using it as a leading indicator, especially now, are various.  These objections include: I don’t think such a narrow measure is one that can be relied upon;  both the yields at the short and long-end of the curve have been overtly and officially manipulated, thus distorting the curve; and, although the yield curve may have been an accurate leading indicator in the past, this period of economic weakness is inherently dissimilar in nature from past recessions and depressions in a multitude of ways – thus, historical yardsticks and metrics probably won’t (and have not) proven appropriate.

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, below is a weekly chart from January 1, 1990 through September 22, 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 September 22, 2017 closing value of .80%.  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

Additionally, below is a chart showing the same spread between the 10-Year Treasury and 2-Year Treasury, albeit with a slightly different measurement, using constant maturity securities.  This daily chart is from June 1, 1976 through September 21, 2017, with recessionary periods shown in gray. This chart shows a value of .82%:

T10Y2Y_9-22-17 .82

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; accessed September 25, 2017:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2502.22 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the September 14, 2017 update (reflecting data through September 8, 2017) is -1.512.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on September 20, 2017 incorporating data from January 5,1973 through September 15, 2017, on a weekly basis.  The September 15, 2017 value is -.86:

NFCI_9-20-17 -.86

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 20, 2017:

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

The ANFCI chart below was last updated on September 20, 2017 incorporating data from January 5,1973 through September 15, 2017, on a weekly basis.  The September 15 value is -.60:

ANFCI_9-20-17 -.60

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 20, 2017:

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

_________

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 2501.99 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the September 7, 2017 update (reflecting data through September 1, 2017) is -1.506.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on September 13, 2017 incorporating data from January 5,1973 through September 8, 2017, on a weekly basis.  The September 8, 2017 value is -.85:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 13, 2017:

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

The ANFCI chart below was last updated on September 13, 2017 incorporating data from January 5,1973 through September 8, 2017, on a weekly basis.  The September 8 value is -.58:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 13, 2017:

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

_________

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 2495.79 as this post is written

Recession Probability Models – September 2017

There are a variety of economic models that are supposed to predict the probabilities of recession.

While I don’t agree with the methodologies employed or probabilities of impending economic weakness as depicted by the following two models, I think the results of these models should be monitored.

Please note that each of these models is updated regularly, and the results of these – as well as other recession models – can fluctuate significantly.

The first is the “Yield Curve as a Leading Indicator” from the New York Federal Reserve.  I wrote a post concerning this measure on March 1, 2010, titled “The Yield Curve as a Leading Indicator.”

Currently (last updated September 7, 2017 using data through August) this “Yield Curve” model shows a 9.9858% probability of a recession in the United States twelve months ahead.  For comparison purposes, it showed a 9.4544% probability through July, and a chart going back to 1960 is seen at the “Probability Of U.S. Recession Predicted by Treasury Spread.” (pdf)

The second model is from Marcelle Chauvet and Jeremy Piger.  This model is described on the St. Louis Federal Reserve site (FRED) as follows:

Smoothed recession probabilities for the United States are obtained from a dynamic-factor markov-switching model applied to four monthly coincident variables: non-farm payroll employment, the index of industrial production, real personal income excluding transfer payments, and real manufacturing and trade sales. This model was originally developed in Chauvet, M., “An Economic Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching,” International Economic Review, 1998, 39, 969-996. (http://faculty.ucr.edu/~chauvet/ier.pdf)

Additional details and explanations can be seen on the “U.S. Recession Probabilities” page.

This model, last updated on September 1, 2017, currently shows a .20% probability using data through June.

Here is the FRED chart (last updated September 1, 2017):

RECPROUSM156N

Data Source:  Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed September 8, 2017:

http://research.stlouisfed.org/fred2/series/RECPROUSM156N

The two models featured above can be compared against measures seen in recent blog posts.  For instance, as seen in the September 8 post titled “The September 2017 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 16.08% probability of a U.S. recession within the next 12 months.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2461.43 as this post is written

Deflation Probabilities – September 7, 2017 Update

While I do not agree with the current readings of the measure – I think the measure dramatically understates the probability of deflation, as measured by the CPI – the Federal Reserve Bank of Atlanta maintains an interesting data series titled “Deflation Probabilities.”

As stated on the site:

Using estimates derived from Treasury Inflation-Protected Securities (TIPS) markets, described in a technical appendix, this weekly report provides two measures of the probability of consumer price index (CPI) deflation through 2022.

A chart shows the trends of the probabilities.  As one can see in the chart, the readings are volatile.

As for the current weekly reading, the September 7, 2017 update states the following:

The 2017–22 deflation probability was 5 percent on September 6, unchanged from August 30. The 2016–21 deflation probability was 4 percent on September 6, up from 3 percent on August 30. These 2016–21 and 2017–22 deflation probabilities, measuring the likelihoods of net declines in the consumer price index over the five-year periods starting in early 2016 and early 2017, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2016 and April 2017 and the 10-year TIPS issued in July 2011 and July 2012.

_________

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 2464.27 this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the September 7, 2017 update (reflecting data through September 1, 2017) is -1.506.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on September 7, 2017 incorporating data from January 5,1973 through September 1, 2017, on a weekly basis.  The September 1, 2017 value is -.88:

NFCI_9-7-17 -.88

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 7, 2017:

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

The ANFCI chart below was last updated on September 7, 2017 incorporating data from January 5,1973 through September 1, 2017, on a weekly basis.  The September 1 value is -.60:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed September 7, 2017:

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

_________

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 2465.10 as this post is written

Charts Indicating Economic Weakness – September 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 recently-released 2nd quarter GDP figure (Second Estimate) was 3.0%, 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 imply weaker growth is that of the Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index), both featured in the August 17, 2017 post titled “Broad-Based Indicators Of Economic Activity.”  Below is a chart of the CFNAI, as of August 21, 2017:

CFNAI

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed September 3, 2017:

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

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 Composite Index To Lagging Composite Index Ratio

source:  Haver’s August 17, 2017 post (“Widespread Gain for U.S. Leading Economic Indicators in July“)

Consumer Spending

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.  This weakness has widespread consequences for the U.S. economy, including the implications stemming from the substantial number of retail store closures.

There are many indications of retail weakness, including various stock charts.  One is the underperformance of retailers to the overall stock market, as seen in the ratio of retail stocks (XRT as a proxy) to the S&P500.  As seen below, XRT as a ratio to the S&P500 (bottom plot) has been declining since roughly mid-2015:

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

XRT:SPX chart

Another worrisome aspect is the peaking in auto sales, with the accompanying widespread economic implications.

Construction Activity

Various construction measures are indicating lesser levels – if not contraction – of activity.

Among the most concerning charts is that for Total Nonresidential Construction Spending, on a “Percent Change From Year Ago” basis, as seen below: (current reading (through July) is $688,419 million):

Total Nonresidential Construction Percent Change From Year Ago

source: U.S. Bureau of the Census, Total Construction Spending: Nonresidential [TLNRESCONS], retrieved from FRED, Federal Reserve Bank of St. Louis;  accessed September 5, 2017;

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

Inflation Trends

Current inflation levels and the possibility of deflation (when the CPI goes below zero) 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 outright sustained deflation will occur, with wide-ranging economic implications.  As I have stated in past commentaries, my analyses indicate that surveys or “market-based” measures concerning deflation will provide adequate “advance warning” of this deflation.

For reference, here is the “Core PCE” measure as of the August 31, 2017 update, showing data through July, with a current reading of 1.4%:

Core PCE inflation chart

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; accessed September 6, 2017:

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

Other Indicators

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2457.85 as this post is written

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the August 24, 2017 update (reflecting data through August 18, 2017) is -1.48.

Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.

Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).

Here are summary descriptions of each, as seen in FRED:

The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.

The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.

For further information, please visit the Federal Reserve Bank of Chicago’s web site:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on August 30, 2017 incorporating data from January 5,1973 through August 25, 2017, on a weekly basis.  The August 25, 2017 value is -.87:

NFCI_8-30-17

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

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

The ANFCI chart below was last updated on August 30, 2017 incorporating data from January 5,1973 through August 25, 2017, on a weekly basis.  The August 25 value is -.17:

ANFCI_8-30-17

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

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

_________

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 2458.61 as this post is written