Monthly Archives: October 2017

Consumer Confidence Surveys – As Of October 31, 2017

Doug Short had a blog post of October 31, 2017 (“Consumer Confidence Highest in 17 Years“) 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.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2576.86 as this post is written

Employment Cost Index (ECI) – Third Quarter 2017

While the concept of Americans’ incomes can be defined in a number of ways, many prominent measures continue to show disconcerting trends.

One prominent measure is the Employment Cost Index (ECI).

Here is a description from the BLS document titled “The Employment Cost Index:  what is it?“:

The Employment Cost Index (ECI) is a quarterly measure of the change in the price of labor, defined as compensation per employee hour worked. Closely watched by many economists, the ECI is an indicator of cost pressures within companies that could lead to price inflation for finished goods and services. The index measures changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. As a fixed-weight, or Laspeyres, index, the ECI controls for changes occurring over time in the industrial-occupational composition of employment.

On October 31, 2017, the ECI for the third quarter was released.  Here are two excerpts from the BLS release titled “Employment Cost Index – September 2017“:

Compensation costs for civilian workers increased 0.7 percent, seasonally adjusted, for the 3-month period ending in September 2017, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.7 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.8 percent. (See tables A, 1, 2, and 3.)

also:

Compensation costs for civilian workers increased 2.5 percent for the 12-month period ending in September 2017. In September 2016, compensation costs increased 2.3 percent. Wages and salaries increased 2.5 percent for the 12-month period ending in September 2017 and increased 2.4 percent for the 12-month period ending in September 2016. Benefit costs increased 2.4 percent for the 12-month period ending in September 2017. In September 2016, the increase was 2.3 percent. (See tables A, 4, 8, and 12.)

Below are three charts, updated on October 31, 2017 that depict various aspects of the ECI, which is seasonally adjusted (SA):

The first depicts the ECI, with a value of 130.6:

ECIALLCIV_10-31-17 130.6

source: US. Bureau of Labor Statistics, Employment Cost Index: Total compensation: All Civilian[ECIALLCIV], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed October 31, 2017:

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

The second chart depicts the ECI on a “Percent Change from Year Ago” basis, with a value of 2.5%:

ECIALLCIV Percent Change From Year Ago

The third chart depicts the ECI on a “Percent Change” (from last quarter) basis, with a value of .7%:

ECIALLCIV Percent Change

_________

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 2576.41 as this post is written

Another Recession Probability Indicator – Updated Through Q2 2017

Each month I have been highlighting various estimates of U.S. recession probabilities.  The latest update was that of October 4, 2017, titled “Recession Probability Models – October 2017.”

While I don’t agree with the methodologies employed or the probabilities of impending economic weakness as depicted by these and other estimates, I do believe that the results of these models and estimates should be monitored.

Another probability of recession is provided by James Hamilton, and it is titled “GDP-Based Recession Indicator Index.”  A description of this index, as seen in FRED:

This index measures the probability that the U.S. economy was in a recession during the indicated quarter. It is based on a mathematical description of the way that recessions differ from expansions. The index corresponds to the probability (measured in percent) that the underlying true economic regime is one of recession based on the available data. Whereas the NBER business cycle dates are based on a subjective assessment of a variety of indicators that may not be released until several years after the event , this index is entirely mechanical, is based solely on currently available GDP data and is reported every quarter. Due to the possibility of data revisions and the challenges in accurately identifying the business cycle phase, the index is calculated for the quarter just preceding the most recently available GDP numbers. Once the index is calculated for that quarter, it is never subsequently revised. The value at every date was inferred using only data that were available one quarter after that date and as those data were reported at the time.

If the value of the index rises above 67% that is a historically reliable indicator that the economy has entered a recession. Once this threshold has been passed, if it falls below 33% that is a reliable indicator that the recession is over.

Additional reference sources for this index and its construction can be seen in the Econbrowser post of February 14, 2016 titled “Recession probabilities” as well as on the “The Econbrowser Recession Indicator Index” page.

Below is a chart depicting the most recent value of 3.3%, for the second quarter of 2017, last updated on October 27, 2017 (after the October 27, 2017 Gross Domestic Product Q3 2017 Advance Estimate (pdf)):

James Hamilton's GDP-Based Recession Indicator Index

source:  Hamilton, James, GDP-Based Recession Indicator Index [JHGDPBRINDX], retrieved from FRED, Federal Reserve Bank of St. Louis on October 27, 2017:

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

_________

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 2576.58 as this post is written

Velocity Of Money – Charts Updated Through October 27, 2017

Here are three charts from the St. Louis Fed depicting the velocity of money in terms of the MZM, M1 and M2 money supply measures.

All charts reflect quarterly data through the 3rd quarter of 2017, and were last updated as of October 27, 2017.  As one can see, two of the three measures are very near an all-time low for the periods depicted:

Velocity of MZM Money Stock, current value = 1.296:

MZM money velocity

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 28, 2017:

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

Velocity of M1 Money Stock, current value = 5.495:

M1 Money Velocity

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 28, 2017:

http://research.stlouisfed.org/fred2/series/M1V

Velocity of M2 Money Stock, current value = 1.427:

M2 Money Velocity

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 28, 2017:

http://research.stlouisfed.org/fred2/series/M2V

_________

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 2581.07 as this post is written

Real GDP Chart Since 1947 With Trendline – 3rd Quarter 2017

For reference purposes, below is a chart from Doug Short’s “Q3 GDP Advance Estimate: Real GDP at 3.0%” post of October 27, 2017, depicting Real GDP, with a trendline, as depicted.  This chart reflects the Gross Domestic Product Q3 2017 Advance Estimate (pdf) of October 27, 2017:

U.S. Long-Term Real GDP chart

_________

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 2573.45 as this post is written

Durable Goods New Orders – Long-Term Charts Through September 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 September 2017, updated on October 25, 2017. This value is $238,695 ($ Millions):

(click on charts to enlarge images)

DGORDER_10-25-17 238695

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 October 25, 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 2554.58 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 October 19, 2017 update (reflecting data through October 13, 2017) is -1.555.

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 October 25, 2017 incorporating data from January 8, 1971 through October 20, 2017, on a weekly basis.  The October 20, 2017 value is -.91:

NFCI_10-25-17 -.91

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

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

The ANFCI chart below was last updated on October 25, 2017 incorporating data from January 8,1971 through October 20, 2017, on a weekly basis.  The October 20 value is -.69:

ANFCI_10-25-17 -.69

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 25, 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 2557.75 as this post is written

Updates Of Economic Indicators October 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 October 2017 Chicago Fed National Activity Index (CFNAI) updated as of October 23, 2017:

The CFNAI, with current reading of .17:

CFNAI_10-23-17 .17

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, October 23, 2017;

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

The CFNAI-MA3, with current reading of -.16:

CFNAI-MA3_10-23-17 -.16

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis, October 23, 2017;

https://fred.stlouisfed.org/series/CFNAIMA3

The ECRI WLI (Weekly Leading Index):

As of October 20, 2017 (incorporating data through October 20, 2017) the WLI was at 146.6 and the WLI, Gr. was at 2.3%.

A chart of the WLI,Gr., from Doug Short’s ECRI update post of October 20, 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 October 14, 2017:

ADS Index

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

As per the October 19, 2017 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Declined in September” (pdf) the LEI was at 128.6, the CEI was at 115.7, and the LAG was 125.2 in September.

An excerpt from the release:

“The US LEI declined slightly in September for the first time in the last twelve months, partly a result of the temporary impact of the recent hurricanes,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The source of weakness was concentrated in labor markets and residential construction, while the majority of the LEI components continued to contribute positively. Despite September’s decline, the trend in the US LEI remains consistent with continuing solid growth in the US economy for the second half of the year.”

Here is a chart of the LEI from Doug Short’s Conference Board Leading Economic Index update of October 19, 2017:

Conference Board Leading Economic Index

_________

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 2574.30 as this post is written

The U.S. Economic Situation – October 23, 2017 Update

Perhaps the main reason that I write of our economic situation is that I continue to believe, based upon various analyses, that our economic situation is in many ways misunderstood.  While no one likes to contemplate a future rife with economic adversity, current and future economic problems must be properly recognized and rectified if high-quality, sustainable long-term economic vitality is to be realized.

There are an array of indications and other “warning signs” – many readily apparent – that current economic activity and financial market performance is accompanied by exceedingly perilous dynamics.

I have written extensively about this peril, including in the following:

Building Financial Danger” (ongoing updates)

A Special Note On Our Economic Situation

Forewarning Pronounced Economic Weakness

Thoughts Concerning The Next Financial Crisis

Was A Depression Successfully Avoided?

Has the Financial System Strengthened Since the Financial Crisis?

The Next Crash And Its Significance

My analyses continues to indicate that the growing level of financial danger will lead to the next stock market crash that will also involve (as seen in 2008) various other markets as well.  Key attributes of this next crash is its outsized magnitude (when viewed from an ultra-long term historical perspective) and the resulting economic impact.  This next financial crash is of tremendous concern, as my analyses indicate it will lead to a Super Depression – i.e. an economy characterized by deeply embedded, highly complex, and difficult-to-solve problems.

For long-term reference purposes, here is a chart of the Dow Jones Industrial Average since 1900, depicted on a monthly basis using a LOG scale (updated through October 20, 2017, with a last value of 23328.63):

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

DJIA from 1900

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2575.21 as this post is written

Money Supply Charts Through September 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 October 20, 2017 depicting data through September 2017, with a value of $15,112.8 Billion:

MZMSL

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

MZMSL Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 23, 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 October 19, 2017, depicting data through September 2017, with a value of $13,701.2 Billion:

M2SL

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 5.1%:

M2SL Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 23, 2017:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2575.21 as this post is written