Monthly Archives: May 2018

Durable Goods New Orders – Long-Term Charts Through April 2018

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 April 2018, updated on May 25, 2018. This value is $248,496 ($ 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 May 25, 2018;

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

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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.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2719.22 as this post is written

Money Supply Charts Through April 2018

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 May 18, 2018 depicting data through April 2018, with a value of $15,374.1 Billion:

MZMSL

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 3.8%:

MZMSL Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 24, 2018:

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 May 17, 2018, depicting data through April 2018, with a value of $13,951.5 Billion:

M2SL_5-17-18 13951.5

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 3.7%:

M2SL Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 24, 2018:

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2733.29 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 May 17, 2018 update (reflecting data through May 11, 2018) is -1.122.

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 May 23, 2018 incorporating data from January 8, 1971 through May 18, 2018, on a weekly basis.  The May 18, 2018 value is -.83:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 23, 2018:

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

The ANFCI chart below was last updated on May 23, 2018 incorporating data from January 8,1971 through May 18, 2018, on a weekly basis.  The May 18 value is -.58:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 23, 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 2713.95 as this post is written

The U.S. Economic Situation – May 23, 2018 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 May 18, 2018, with a last value of 24715.09):

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

DJIA since 1900

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2724.44 as this post is written

Zillow Q2 2018 Home Price Expectations Survey – Summary & Comments

On May 22, 2018, the Zillow Q2 2018 Home Price Expectations Survey results were released.  This survey is done on a quarterly basis.

An excerpt from the press release:

In the meantime, experts think the housing market will continue to experience strong appreciation. They predict U.S. home values will rise 5.5 percent in 2018 to a median of $220,800. At this time last year, predictions were for home values to rise 3.7 percent in 2018.

“Constrained home supply, persistent demand, very low unemployment, and steady economic growth have given a jolt to the near-term outlook for U.S. home prices,” said Pulsenomics founder, Terry Loebs. “These conditions are overshadowing concerns that mortgage rate increases expected this year might quash the appetite of prospective home buyers.”

Various Q2 2018 Zillow Home Price Expectations Survey charts are available, including that seen below:

Zillow U.S. Home Price Expectations

As one can see from the above chart, the average expectation is that the residential real estate market, as depicted by the U.S. Zillow Home Value Index, will continually climb.

The detail of the Q2 2018 Home Price Expectations Survey (pdf) is interesting.  Of the 100+ survey respondents, only five (of the displayed responses) forecasts a cumulative price decrease through 2022, and none of those forecasts is for a double-digit percentage decline.   The largest decline is seen as a 7.86% cumulative price decrease through 2022.

The Median Cumulative Home Price Appreciation for years 2018-2022 is seen as 5.75%, 10.24%, 13.53%, 16.75%, and 20.46%, respectively.

For a variety of reasons, I continue to believe that even the most “bearish” of these forecasts (as seen in the above-referenced forecast) will prove far too optimistic in hindsight.  From a longer-term historical perspective, such a decline is very mild in light of the wild excesses that occurred over the “bubble” years.

I have written extensively about the residential real estate situation.  For a variety of reasons, it is exceedingly complex.  While many people continue to have an optimistic view regarding future residential real estate prices, in my opinion such a view is unsupported on an “all things considered” basis.  Furthermore, from these price levels there exists outsized potential for a price decline of severe magnitude, unfortunately.  I discussed this downside, based upon historical price activity, in the October 24, 2010 post titled “What’s Ahead For The Housing Market – A Look At The Charts.”

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2724.44 as this post is written

Trends Of S&P500 Earnings Forecasts

S&P500 earnings trends and estimates are a notably important topic, for a variety of reasons, at this point in time.

FactSet publishes a report titled “Earnings Insight” that contains a variety of information including the trends and expectations of S&P500 earnings.

For reference purposes, here are two charts as seen in the “Earnings Insight” (pdf) report of May 18, 2018:

from page 22:

(click on charts to enlarge images)

S&P500 EPS forecasts

from page 23:

S&P500 EPS 2008-2019

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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 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 2733.01 as this post is written

S&P500 “Bottom Up” EPS Forecasts Years 2018, 2019, And 2020

As many are aware, Thomson Reuters publishes earnings estimates for the S&P500.  (My other posts concerning S&P earnings estimates can be found under the S&P500 Earnings tag)

The following estimates are from Exhibit 24 of the “S&P500 Earnings Scorecard” (pdf) of May 21, 2018, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts.  For reference, the Year 2014 value is $118.78/share, the Year 2015 value is $117.46, the Year 2016 value is $118.10/share, and the Year 2017 value is $132.00/share:

Year 2018 estimate:

$160.71/share

Year 2019 estimate:

$175.91/share

Year 2020 estimate:

$192.59/share

_____

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 2733.01 as this post is written

Standard & Poor’s S&P500 EPS Estimates 2018 2019 – May 16, 2018

As many are aware, Standard & Poor’s publishes earnings estimates for the S&P500.  (My posts concerning their estimates can be found under the S&P500 Earnings tag)

For reference purposes, the most current estimates are reflected below, and are as May 16, 2018:

Year 2018 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $157.09/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $147.27/share

Year 2019 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $174.07/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $163.33

_____

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 2734.0 as this post is written

Updates Of Economic Indicators May 2018

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 May 2018 Chicago Fed National Activity Index (CFNAI) updated as of May 21, 2018:

The CFNAI, with current reading of .34:

CFNAI_5-21-18 .34

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, May 21, 2018;

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

The CFNAI-MA3, with current reading of .46:

CFNAI-MA3

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis, May 21, 2018;

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

The ECRI WLI (Weekly Leading Index):

As of May 18, 2018 (incorporating data through May 11, 2018) the WLI was at 148.7 and the WLI, Gr. was at 4.3%.

A chart of the WLI,Gr., from Doug Short’s ECRI update post of May 18, 2018:

ECRI WLI,Gr. Since 2000 4.3 Percent

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

Here is the latest chart, depicting the ADS Index from December 31, 2007 through May 12, 2018:

ADS Index

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

As per the May 17, 2018 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in April” (pdf) the LEI was at 109.4, the CEI was at 103.5, and the LAG was 104.7 in April.

An excerpt from the release:

“April’s increase and continued uptrend in the U.S. LEI suggest solid growth should continue in the second half of 2018. However, the LEI’s six-month growth rate has recently moderated somewhat, suggesting growth is unlikely to strongly accelerate,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “In April, stock prices and housing permits were the only negative contributors, whereas the labor market components, which made negative contributions in March, improved.”

Here is a chart of the LEI from Doug Short’s Conference Board Leading Economic Index update of May 17, 2018:

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 2734.29 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – May 18, 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 Doug Short’s ECRI update post of May 18, 2018 titled “ECRI Weekly Leading Index.”  These charts are on a weekly basis through the May 18, 2018 release, indicating data through May 11, 2018.

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

ECRI WLI

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

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

ECRI WLI,Gr.

_________

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 2714.80 as this post is written