Monthly Archives: October 2011

Disturbing Charts (Update 5)

I find the following charts to be disturbing.   These charts would be disturbing at any point in the economic cycle; that they depict such a tenuous situation now – 28 months after the official (as per the 9-20-10 NBER 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.  I regularly discuss many troubling characteristics of our economy in this EconomicGreenfield.com blog.

All of these charts (except one, as noted) are from The Federal Reserve, and represent the most recently updated data.

The following 8 charts are from the St. Louis Federal Reserve:

(click on charts to enlarge images)

Housing starts (last updated 10-19-11):

The Federal Deficit (last updated 10-14-11):

Federal Net Outlays (last updated 10-14-11):

State & Local Personal Income Tax Receipts  (% Change from Year Ago)(last updated 7-29-11):

Total Loans and Leases of Commercial Banks (% Change from Year Ago)(last updated 10-12-11):

Bank Credit – All Commercial Banks (% Change from Year Ago)(last updated 10-12-11):

M1 Money Multiplier (last updated 10-27-11):

Median Duration of Unemployment (last updated 10-7-11):

This next chart is from the CalculatedRisk.com blog post of 10-7-11, titled “September Unemployment Report…” and it shows (in red) the relative length and depth of this downturn and subsequent recovery from an employment perspective:

This last chart is of the Chicago Fed National Activity Index (CFNAI) and it depicts broad-based economic activity (last updated 10-24-11):

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1253.30 as this post is written

Recession Measures – Updated

This post is the latest update to a series of blog posts seen on the CalculatedRisk.com blog.  The original blog post of April 12, 2010, is titled “Recession Measures.” In it, Bill discussed key measures that the NBER uses to determine recoveries, and posted four charts.

Here are those charts, updated in his October 30, 2011 post titled “Recovery Measures.”  The charts are constructed in a fashion different than most – in a “percent of peak” fashion.  As defined, “The following graphs are all constructed as a percent of the peak in each indicator.  This shows when the indicator has bottomed – and when the indicator has returned to the level of the previous peak.  If the indicator is at a new peak, the value is 100%.”  Periods of recession, as defined by the NBER, are shown as blue bars.

Here are the four charts, updated through the dates shown: (click on images to enlarge)

Real Gross Domestic Product, now back to the pre-recession peak:

Real Personal Income Less Transfer Payments, still 5.3% below the pre-recession peak:

Industrial Production, still 6.5% below the pre-recession peak:

Payroll Employment, still 4.8% below the pre-recession peak:

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1285.08 as this post is written

Durable Goods New Orders – Long-Term Charts

Many people place emphasis on Durable Goods New Orders as an economic indicator.

For reference, here are a few charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through September, last updated on October 26.  The last value is 200,333:

Here is the chart depicting the measure on a Percentage Change from a Year Ago:

Lastly, a chart from Doug Short’s post of October 26 titled “Durable Goods Orders In Historical Perspective” showing the Durable Goods New Orders vs. the S&P500:

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1277.52 as this post is written

Volatility In Income Among The Most Affluent Americans

In the October 22-23 Wall Street Journal, there was an article titled “The Wild Ride Of The 1%.”

This article discusses the fluctuations, and causes of fluctuations, of the wealth of the country’s most affluent.

While the entire article is worthwhile reading, I found the following excerpts to be particularly notable:

The American rich, who used to be the most stable slice of the personal economy, are now the most volatile, with escalating booms and busts.

also:

The super-high earners have the biggest crashes. The number of Americans making $1 million or more fell 40% between 2007 and 2009, to 236,883, while their combined incomes fell by nearly 50%—far greater than the less than 2% drop in total incomes of those making $50,000 or less, according to Internal Revenue Service figures.

also:

Rising debt plays a role. While the rich are often portrayed as thrifty “millionaires next door,” the era of low interest rates and easy money has turned them into a leveraged elite. The household debt of the top 1% surged more than three-fold between 1989 and 2007, to $600 billion, and grew faster than their net worth.

Add to that the growing arms race in conspicuous consumption and you get big spenders who are only one crisis away from financial ruin.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1284.59 as this post is written

 

 

Updates On Economic Indicators October 2011

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

The October Chicago Fed National Activity Index (CFNAI)(pdf) updated as of October 24, 2011:

The USA TODAY/IHS Global Insight Economic Outlook Index:

An excerpt from the September 27 update titled “Index forecasts continued weak growth” :

The September update of the USA TODAY/IHS Global Insight Economic Outlook Index shows real GDP growth, at a six-month annualized growth rate, remaining below 2% through February. Persistent unemployment, elevated debt levels, high energy and food prices and low confidence have stalled consumer spending. Businesses are hesitant to expand amid uncertainty.

The ECRI WLI (Weekly Leading Index):

As of 10/14/11 the WLI was at 120.4 and the WLI, Gr. was at -10.1%.

The Dow Jones ESI (Economic Sentiment Indicator):

The Indicator as of August 31 was at 41.5, as seen below:

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

Here is the latest chart, depicting 10-15-09 to 10-15-11:

The Conference Board Leading (LEI) and Coincident (CEI) Economic Indexes:

As per the October 20 release, the LEI was at 116.4 and the CEI was at 103.3 in September.

An excerpt from the October 20 release:

Says Ken Goldstein, economist at The Conference Board: “The LEI is pointing to soft economic conditions through the end of 2011. There is a risk that already low confidence – consumer, business and investor – could weaken further, putting downward pressure on demand and tipping the economy into recession. The probability of a downturn starting over the next few months remains at about 50 percent.”

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1229.05 as this post is written

PPI,CPI & Profit Margin Trends – October 2011 Update

In various past posts I have written of the challenges businesses face in pricing, given today’s economic environment.  One aspect that I mentioned in the April 25 2011 and December 16 2010 posts was how the PPI (Producer Price Index) growth was significantly outpacing that of the CPI.

Since those posts, this PPI-CPI growth rate issue has remained notable.  Doug Short, on his blog, has posted a few interesting charts illustrating this concept from a long-term historical viewpoint.  Both of the charts shown below are from his October 20, 2011 post titled “Profit Margin Squeeze Remains a Challenge.”

First, here is a chart that shows the ratio, in the PPI, of Crude Goods to Finished Goods. The CPI is plotted below, in green.  This situation, as depicted, is problematical for firms, and the overall economy, on a number of fronts:

(click on chart images to enlarge)

Second, a chart that shows data from the Philadelphia Federal Reserve regarding Prices Paid vs. Prices Received, with Inflation (CPI) and Recession periods also shown:

I believe that what this chart depicts is notable in a variety of ways.  As shown, we are experiencing a unique situation, and while the index level has recently subsided, we are near historical peaks for the 12-month moving average (MA) as shown.

I believe this data and its implications for businesses and the economy at large is of great concern.  Seeing how this situation resolves will be very interesting.  This is especially so given the vulnerability of the U.S. Dollar to a substantial decline, a topic that I have written extensively about.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1244.69 as this post is written

St. Louis Financial Stress Index – October 20 Update

On March 28 I wrote a post (“The STLFSI“) about the  STLFSI (St. Louis Fed’s Financial Stress Index) which is supposed to measure stress in the financial system.  Here is the most recent chart.  This chart was last updated on October 20, incorporating data from 12-31-93 to 10-14-11 on a weekly basis.  The present level is .947:

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I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this blog 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 1229.01 as this post is written

Thoughts On The Next Stock Market Decline

In my post of October 10 (“Near-Term Direction Of Stock Market“)  I stated with regard to the S&P500:

The question now becomes whether that 1074.77 was a “lasting bottom,” or whether there is more near-term downside.  I believe that the 1074.77 low will not be a “lasting bottom” – i.e. it will be breached to the downside in the near-term.

In my post of Monday, October 17 (“Danger Signs In The Stock Market, Financial System And Economy“) I further highlighted a variety of building risks.

Near the end of that blog post I commented:

Of further concern is whether, and when, the above-mentioned problems might reach a point at which another (financial system) crash occurs.

I have come to the conclusion, based on my overall analysis of the growing risk, that the next leg down in the stock market might not be “orderly.”  In other words, it may be a stock market crash.  At this point I would assign the probability of such a stock market crash in the near-term being (at least) 50%.

Here is an updated chart of the S&P500, on a 1-year daily basis through the present, with price labels, for reference:

(click on chart to enlarge image)(chart courtesy of StockCharts.com)

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1202.83 as this post is written

October 19 Gallup Poll On Americans’ Personal Finances – Notable Excerpts

On October 19, Gallup released poll results titled “Americans Grow More Negative About Their Personal Finances.”

I find this poll interesting for a variety of reasons; perhaps chief among them is as another indication of growing financial strain among households.  A few excerpts of note:

Nearly one in four U.S. adults (22%) now rate their personal financial situation as “poor.” This is up slightly from the 16% to 19% range seen during and after the official U.S. recession, and is the highest percentage since Gallup began asking this question in 2001.

also:

Americans are also less hopeful about their future personal financial situations. Nearly half (48%) say their personal financial situation is “getting worse,” up from 41% in April and nearly tying the record-high 49% who said so in April 2008. A new low of 29% say their personal financial situation is getting better.

also:

The fact that they are now even more likely than they were during the recession to rate their economic situation as poor helps explain why 80% of Americans maintain that the U.S. economy remains in recession. Further, the 48% who say their situation is getting worse is now similar to the percentage who said so in the months just prior to the U.S. economic collapse, perhaps giving fodder to those who predict a double-dip recession.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1209.82 as this post is written

Conference Board CEO Confidence 3Q 2011

On October 7, I wrote a post about the latest Business Roundtable’s CEO Economic Outlook Survey and the Duke/CFO Magazine Global Business Outlook Survey titled “CEO & CFO Surveys 3Q 2011.”

Subsequent to that post, on October 11, The Conference Board released its 3rd Quarter CEO Confidence Survey.   The overall measure of CEO Confidence was at 42, down from 55 in the second quarter.

Notable excerpts from the October 11 Press Release include:

Says Lynn Franco, Director of The Conference Board Consumer Research Center: “CEO Confidence has declined substantially in the last two quarters and is now at its lowest level in over two years. Clearly, this prolonged period of slow growth is taking a toll on confidence, and expectations are that these lackluster conditions will persist through early 2012.”

also:

CEOs’ optimism about the short-term outlook also deteriorated sharply. Currently, about 19 percent of business leaders anticipate an improvement in economic conditions over the next six months, down from 43 percent in the second quarter. Expectations for their own industries are also quite negative, with approximately 22 percent of CEOs expecting conditions to improve in the months ahead, down from 44 percent last quarter.

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog 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 1225.38 as this post is written