Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – November 16, 2018 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

Below are three long-term charts, from the Doug Short site’s ECRI update post of November 16, 2018 titled “ECRI Weekly Leading Index Update: ‘Construction Crumbling’.” These charts are on a weekly basis through the November 16, 2018 release, indicating data through November 9, 2018.

Here is the ECRI WLI (defined at ECRI’s glossary):

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This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

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This last chart depicts, on a long-term basis, the WLI, Gr.:

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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 2727.82 as this post is written

The November 2018 Wall Street Journal Economic Forecast Survey

The November 2018 Wall Street Journal Economic Forecast Survey was published on October 11, 2018. The headline is “Economists Split on Whether Outcome of Midterms Will Increase or Decrease Uncertainty.”

I found numerous items to be notable – although I don’t necessarily agree with them – both within the article and in the “Economist Q&A” section.

Two excerpts:

Half of economists expected the next recession to start in 2020—the year of the next presidential election—and just over 70% of respondents said that there was a greater risk that economic growth would undershoot their forecasts over the next 12 months than overshoot.

also:

One point economists appeared to agree on is they expected the labor market to remain strong.

They estimated employers need to add just over 127,000 jobs a month over the next 12 months for the U.S. economy absorb new workers into the labor force and hold the unemployment rate steady.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 19.55%. The individual estimates, of those who responded, ranged from 0% to 50%. For reference, the average response in October’s survey was 17.64%.

As stated in the article, the survey’s respondents were 58 academic, financial and business economists. Not every economist answered every question. The survey was conducted November 9 – November 13, 2018.

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The current average forecasts among economists polled include the following:

GDP:

full-year 2018: 3.1%

full-year 2019: 2.3%

full-year 2020: 1.8%

full-year 2021: 1.8%

Unemployment Rate:

December 2018: 3.6%

December 2019: 3.5%

December 2020: 3.6%

December 2021: 3.9%

10-Year Treasury Yield:

December 2018: 3.23%

December 2019: 3.53%

December 2020: 3.45%

December 2021: 3.47%

CPI:

December 2018: 2.30%

December 2019: 2.40%

December 2020: 2.20%

December 2021: 2.20%

Crude Oil ($ per bbl):

for 12/31/2018: $64.00

for 12/31/2019: $65.27

for 12/31/2020: $63.13

for 12/31/2021: $61.94

(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” category)

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I post various economic forecasts because I believe they should be carefully monitored. However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2728.23 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 November 15, 2018 update (reflecting data through November 9, 2018) is -.998.

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 November 15, 2018 incorporating data from January 8, 1971 through November 9, 2018, on a weekly basis. The November 9 value is -.81:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 15, 2018:

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

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The ANFCI chart below was last updated on November 15, 2018 incorporating data from January 8,1971 through November 9, 2018, on a weekly basis. The November 9 value is -.65:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 15, 2018:

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 2682.47 as this post is written

Walmart’s Q3 2019 Results – Comments

I found various notable items in Walmart’s Q3 2019 management call transcript (pdf) dated November 15, 2018. (as well, there is Walmart’s press release of the Q3 results (pdf) 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 Brett Biggs, EVP & CFO, page 10, wrt Walmart U.S.:

Walmart U.S. delivered strong comp sales growth of 3.4 percent. We
started the quarter strong with a solid back-to-school season and finished
strong with solid sales of fall seasonal goods. Our omnichannel offering
continues to resonate with customers and drive momentum in this healthy
consumer environment. Keep in mind that we lapped last year’s comp
sales benefit of 30-50 basis points from hurricanes, with only a marginal
benefit from storms this year. On a two-year stacked basis, comp sales
increased 6.1 percent. Growth was strong across channels with store
traffic and ticket up 1.2 percent and 2.2 percent, respectively, while
eCommerce sales grew 43 percent and contributed approximately 140
basis points to the segment comp.

comments from Brett Biggs, EVP & CFO, page 11, wrt Walmart U.S.:

Walmart U.S. gross margin rate declined 28 basis points due
primarily to the pricing strategy, higher transportation expenses, and the
increasing mix of eCommerce growth, partially offset by the overlap from
last year’s hurricanes.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2701.58 as this post is written

Charts Indicating Economic Weakness – November 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 October 2018 Wall Street Journal Economic Forecast Survey the consensus (average estimate) among various economists is for 3.1% GDP growth in 2018 and 2.4% GDP growth in 2019. 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 October had a last value of $252,692 Million. Shown below is the measure displayed on a “Percent Change From Year Ago” basis with value 7.4%, last updated November 13, 2018:

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

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

Real Hourly 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 weekly earnings for all employees from January 2008 – September 2018. As seen in the chart below, growth in this measure over the time period depicted has been intermittent, volatile, and, especially since 2017, weak:

source: Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, Real average weekly earnings increase 1.1 percent, September 2017 to September 2018 on the Internet at https://www.bls.gov/opub/ted/2018/real-average-weekly-earnings-increase-1-point-1-percent-september-2017-to-september-2018.htm(visited November 09, 2018).

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 3.7%. 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 November 2, 2018 update (reflecting data through the October employment report) is 73.4%:

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 November 12, 2018:

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

New Home Sales

For numerous economic reasons, the number and price of homes sales, especially new home sales, is a very important aspect of the U.S. economy.

As an indication for the overall health of the overall new home sales market, below is the Dow Jones Home Construction Index, depicted on a weekly basis, LOG scale, from the year 2000 through the closing price of 635.79 on November 13, 2018. As one can see, the latest peak was on January 24, 2018 at 1008.89:

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

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 2722.18 as this post is written

Philadelphia Fed – 4th Quarter 2018 Survey Of Professional Forecasters

The Philadelphia Fed 4th Quarter 2018 Survey of Professional Forecasters was released on November 13, 2018. This survey is somewhat unique in various regards, such as it incorporates a longer time frame for various measures.

The survey shows, among many measures, the following median expectations:

Real GDP: (annual average level)

full-year 2018: 2.9%

full-year 2019: 2.7%

full-year 2020: 2.1%

full-year 2021: 1.7%

Unemployment Rate: (annual average level)

for 2018: 3.9%

for 2019: 3.7%

for 2020: 3.8%

for 2021: 4.0%

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Regarding the risk of a negative quarter in real GDP in any of the next few quarters, mean estimates are 5.7%, 10.6%, 13.6%, 19.1% and 22.8% for each of the quarters from Q4 2018 through Q4 2019, respectively.

As well, there are also a variety of time frames shown (present quarter through the year 2027) with the median expected inflation (annualized) of each. Inflation is measured in Headline and Core CPI and Headline and Core PCE. Over all time frames expectations are shown to be in the 2.0% to 2.4% range.

_____

I post various economic forecasts because I believe they should be carefully monitored. However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2729.79 as this post is written

Deflation Probabilities – November 8, 2018 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 November 8, 2018 update states the following:

The 2018–23 deflation probability was 5 percent on November 7, unchanged from October 31. The 2017–22 deflation probability was also 5 percent on November 7, up from 4 percent on October 31. These deflation probabilities, measuring the likelihoods of net declines in the consumer price index over the five-year periods starting in early 2017 and early 2018, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2017 and April 2018 and the 10-year TIPS issued in July 2012 and July 2013.

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_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2806.83 as this post is written

Building Financial Danger – November 8, 2018 Update

My overall analysis indicates a continuing elevated and growing level of financial danger which contains many worldwide and U.S.-specific “stresses” of a very complex nature. I have written numerous posts in this site concerning both ongoing and recent “negative developments.” These developments, as well as other exceedingly problematic conditions, have presented a highly perilous economic environment that endangers the overall financial system.

Also of ongoing immense importance is the existence of various immensely large asset bubbles, a subject of which I have extensively written. While all of these asset bubbles are wildly pernicious and will have profound adverse future implications, hazards presented by the bond market bubble are especially notable.

Predicting the specific timing and extent of a stock market crash is always difficult, and the immense complexity of today’s economic situation makes such a prediction even more challenging. With that being said, my analyses continue to indicate that a near-term exceedingly large (from an ultra-long term perspective) stock market crash – that would also involve (as seen in 2008) various other markets as well – will occur.

(note: the “next crash” and its aftermath has great significance and implications, as discussed in the post of January 6, 2012 titled “The Next Crash And Its Significance“ and various subsequent posts in the “Economic Depression” category)

As reference, below is a daily chart since 2008 of the S&P500 (through November 7, 2018 with a last price of 2813.89), depicted on a LOG scale, indicating both the 50dma and 200dma as well as price labels:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2813.89 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 November 1, 2018 update (reflecting data through October 26, 2018) is -.997.

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 November 7, 2018 incorporating data from January 8, 1971 through November 2, 2018, on a weekly basis. The November 2 value is -.79:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 7, 2018:

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

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The ANFCI chart below was last updated on November 7, 2018 incorporating data from January 8,1971 through November 2, 2018, on a weekly basis. The November 2 value is -.65:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 7, 2018:

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

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_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2779.41 as this post is written

Markets During Periods Of Federal Reserve Intervention – October 31, 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 October 31, 2018) from the Doug Short site post of November 6 (“Treasury Yields: A Long-Term Perspective“):

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2778.97 as this post is written

EconomicGreenfield

America's Economic Future – A Discussion By Ted Kavadas

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – November 16, 2018 Update

The November 2018 Wall Street Journal Economic Forecast Survey

Chicago Fed National Financial Conditions Index (NFCI)

Walmart’s Q3 2019 Results – Comments

Charts Indicating Economic Weakness – November 2018

U.S. Economic Indicators

Charts Indicating U.S. Economic Weakness

Total Federal Receipts

Real Hourly Earnings

Unemployment

New Home Sales

Other Indicators

Philadelphia Fed – 4th Quarter 2018 Survey Of Professional Forecasters

Deflation Probabilities – November 8, 2018 Update

Building Financial Danger – November 8, 2018 Update

Chicago Fed National Financial Conditions Index (NFCI)

Markets During Periods Of Federal Reserve Intervention – October 31, 2018 Update