Author Archives: Ted Kavadas

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – February 15, 2019 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 February 15, 2019 titled “ECRI Weekly Leading Index Update:  All Measures Down WoW.”  These charts are on a weekly basis through the February 15, 2019 release, indicating data through February 8, 2019.

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:

ECRI YoY of the Four-Week Moving Average

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 2775.60 as this post is written

Charts Indicating Economic Weakness – February 2019

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 February 2019 Wall Street Journal Economic Forecast Survey the consensus (average estimate) among various economists is for 3.0% GDP growth in 2018 and 2.2% 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 December had a last value of $312,584 Million.  Shown below is  the measure displayed on a “Percent Change From Year Ago” basis with value -4.1%, last updated February 13, 2019:

MTSR133FMS Percent Change From Year Ago

source:  U.S. Department of the Treasury. Fiscal Service, Total Federal Receipts [MTSR133FMS], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed February 13, 2019:  
https://fred.stlouisfed.org/series/MTSR133FMS

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Loan Demand And Related Measures

As seen in previous updates, various aspects of lending growth and related measures have shown a contraction.  Shown below is a measure, Net Percentage of Domestic Banks Reporting Stronger Demand for Credit Card Loans, that shows a decline.  The current value is -17.4% as of the February 4, 2019 quarterly update:

DEMCC

source: Board of Governors of the Federal Reserve System (US), Net Percentage of Domestic Banks Reporting Stronger Demand for Credit Card Loans [DEMCC], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed February 11, 2019:
https://fred.stlouisfed.org/series/DEMCC

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Vehicle Miles Traveled

I continue to find the flagging growth trend in the “Vehicle Miles Traveled” (NSA) measure since 2015 to be notable.

“Vehicle Miles Traveled” through November had a last value of 258,533 Million.  Shown below is  the measure displayed on a “Percent Change From Year Ago” basis with value .3%, last updated January 17, 2019:

Vehicle Miles Traveled Percent Change From Year Ago chart

source:   U.S. Federal Highway Administration, Vehicle Miles Traveled [TRFVOLUSM227NFWA], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed February 11, 2019: https://fred.stlouisfed.org/series/TRFVOLUSM227NFWA

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Total Construction Spending:  Commercial

“Total Construction Spending: Commercial” is a measure of construction exhibiting a contraction on a “Percent Change From Year Ago” basis.   This measure through November had a last value of $87,459 Million.  Shown below is the measure displayed on a “Percent Change From Year Ago” basis with a value of -.4%, last updated February 5, 2019:

Total Construction Spending: Commercial Percent Change From Year Ago

source:  U.S. Bureau of the Census, Total Construction Spending: Commercial [TLCOMCONS], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed February 11, 2019: https://fred.stlouisfed.org/series/TLCOMCONS

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Rail Freight Carloads

“Rail Freight Carloads” continues to show a downward progression.  Shown below is a chart with data through November (last value of 1,115,510, updated January 15, 2019):

RAILFRTCARLOADSD11

source:  U.S. Bureau of Transportation Statistics, Rail Freight Carloads [RAILFRTCARLOADSD11], retrieved from FRED, Federal Reserve Bank of St. Louis;  accessed February 12, 2019: https://fred.stlouisfed.org/series/RAILFRTCARLOADSD11

Here is the same measure on a “Percent Change From Year Ago” basis, with value .1%:

Rail Freight Carloads Percent Change From Year Ago

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Other Indicators

As mentioned previously, many other indicators discussed on this site indicate weak economic growth or economic contraction, if not outright (gravely) problematical economic conditions.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2753.03 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 February 7, 2019 update (reflecting data through February 1, 2019) is -.991.

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 February 13, 2019 incorporating data from January 8, 1971 through February 8, 2019, on a weekly basis.  The February 8 value is -.82:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 13, 2019:  
http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on February 13, 2019 incorporating data from January 8, 1971 through February 8, 2019, on a weekly basis.  The February 8 value is -.61:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 13, 2019:  
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 2760.22 as this post is written

10-Year Treasury Yields – Two Long-Term Charts As Of February 8, 2019

I have written extensively about the importance regarding the level of U.S. interest rates.  Rising interest rates have substantial ramifications for many aspects of the current-day economy.  My commentaries with regard to interest rates and the bond bubble are largely found under the “bond bubble” tag.   From an intervention perspective commentary is found under the “Intervention” category.

As reference, here is a long-term chart of the 10-Year Treasury yield since 1980, depicted on a monthly basis, LOG scale:

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

10-Year Treasury Yield Monthly chart

Here is a long-term chart of the 10-Year Treasury yield since 2008, depicted on a daily basis, LOG scale:

10-Year Treasury Yield Daily chart

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2686.79 as this post is written

Building Financial Danger – February 8, 2019 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 February 7, 2019 with a last price of 2706.05), 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)

S&P500 Daily chart

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2706.05 as this post is written

Deflation Probabilities – February 7, 2019 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 2023.

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 February 7, 2019 update states the following:

The 2018–23 deflation probability was 5 percent on February 6, down from 6 percent on January 30. The 2017–22 deflation probability was also 5 percent on February 6, down from 7 percent on January 30. 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.

_________

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 2706.05 as this post is written

The February 2019 Wall Street Journal Economic Forecast Survey

The February 2019 Wall Street Journal Economic Forecast Survey was published on February 7, 2019.  The headline is “ Most Economists Say Fresh Government Shutdown Would Hurt U.S. Growth.”

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:

In response to a separate question, most forecasters, 45.7%, said they expect the next recession to start in 2020, while 39.1% predicted it will start in 2021.

also:

More than three-quarters of forecasters, 76.4%, said they saw a greater risk that the economy would grow more slowly than it would grow faster. While that was a drop from 83.9% in January, it remains a sign of pessimism about the outlook. This time a year ago, fewer than 30% of respondents saw the risk to their growth forecast as tilted to the downside.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 24.53%. The individual estimates, of those who responded, ranged from 0% to 60%.  For reference, the average response in January’s survey was 24.80%.

As stated in the article, the survey’s respondents were 62 academic, financial and business economists.  Not every economist answered every question.  The survey was conducted February 1 – February 5, 2019.

The current average forecasts among economists polled include the following:

GDP:

full-year 2018:  3.0%

full-year 2019:  2.2%

full-year 2020:  1.7%

full-year 2021:  1.8%

Unemployment Rate:

December 2019: 3.7%

December 2020: 3.8%

December 2021: 4.1%

10-Year Treasury Yield:

December 2019: 3.04%

December 2020: 3.08%

December 2021: 3.11%

CPI:

December 2018:  2.00%

December 2019:  2.20%

December 2020:  2.20%

December 2021:  2.20%

Crude Oil  ($ per bbl):

for 12/31/2019: $58.40

for 12/31/2020: $58.91

for 12/31/2021: $58.41

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

_____

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 2696.27 as this post is written

Recession Probability Models – February 2019

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 February 4, 2019 using data through January) this “Yield Curve” model shows a 23.6219% probability of a recession in the United States twelve months ahead.  For comparison purposes, it showed a 21.3459% probability through December, 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 January 2, 2019, [note: no update since then due to government data delay] currently shows a .8% probability using data through October.

Here is the FRED chart (last updated January 2, 2019):

U.S. Recession Probability model

Data Source:  Piger, Jeremy Max and Chauvet, Marcelle, Smoothed U.S. Recession Probabilities [RECPROUSM156N], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed January 9, 2019:  
http://research.stlouisfed.org/fred2/series/RECPROUSM156N

The two models featured above can be compared against measures seen in recent posts.  For instance, as seen in the January 10, 2019 post titled “The January 2019 Wall Street Journal Economic Forecast Survey“ economists surveyed averaged a 24.80% probability of a U.S. recession within the next 12 months.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2732.33 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 January 31, 2019 update (reflecting data through January 25, 2019) is -.917.

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 February 6, 2019 incorporating data from January 8, 1971 through February 1, 2019, on a weekly basis.  The February 1 value is -.78:

NFCI chart

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 6, 2019:  
http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on February 6, 2019 incorporating data from January 8, 1971 through February 1, 2019, on a weekly basis.  The February 1 value is -.58:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed February 6, 2019:  
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 2734.53 as this post is written

The State of the Union Address – Notable Excerpts

I found President Trump’s State of the Union Address last night (February 5, 2019) to contain some noteworthy comments.  While I could comment extensively on many parts of the speech, for now I will indicate excerpts that I found most relevant with regard to the economic situation, and may comment upon them at a future point.  I am highlighting these excerpts for many reasons; it should be noted that I do not necessarily agree with any or all of them.

Here are the excerpts I found most relevant, in the order they occurred in the speech:

In just over 2 years since the election, we have launched an unprecedented economic boom — a boom that has rarely been seen before.  We have created 5.3 million new jobs and importantly added 600,000 new manufacturing jobs — something which almost everyone said was impossible to do, but the fact is, we are just getting started.

Wages are rising at the fastest pace in decades, and growing for blue collar workers, who I promised to fight for, faster than anyone else.  Nearly 5 million Americans have been lifted off food stamps.  The United States economy is growing almost twice as fast today as when I took office, and we are considered far and away the hottest economy anywhere in the world.  Unemployment has reached the lowest rate in half a century. African-American, Hispanic-American and Asian-American unemployment have all reached their lowest levels ever recorded. Unemployment for Americans with disabilities has also reached an all-time low.  More people are working now than at any time in our history –- 157 million.

We passed a massive tax cut for working families and doubled the child tax credit.

We virtually ended the estate, or death, tax on small businesses, ranches, and family farms.

We eliminated the very unpopular Obamacare individual mandate penalty — and to give critically ill patients access to life-saving cures, we passed right to try.

My Administration has cut more regulations in a short time than any other administration during its entire tenure.  Companies are coming back to our country in large numbers thanks to historic reductions in taxes and regulations.

We have unleashed a revolution in American energy — the United States is now the number one producer of oil and natural gas in the world.  And now, for the first time in 65 years, we are a net exporter of energy.

After 24 months of rapid progress, our economy is the envy of the world, our military is the most powerful on earth, and America is winning each and every day.   Members of Congress:  the State of our Union is strong.  Our country is vibrant and our economy is thriving like never before.

On Friday, it was announced that we added another 304,000 jobs last month alone — almost double what was expected.  An economic miracle is taking place in the United States — and the only thing that can stop it are foolish wars, politics, or ridiculous partisan investigations.

also:

As we work to defend our people’s safety, we must also ensure our economic resurgence continues at a rapid pace.

No one has benefitted more from our thriving economy than women, who have filled 58 percent of the new jobs created in the last year.  All Americans can be proud that we have more women in the workforce than ever before — and exactly one century after the Congress passed the Constitutional amendment giving women the right to vote, we also have more women serving in the Congress than ever before.

As part of our commitment to improving opportunity for women everywhere, this Thursday we are launching the first ever Government-wide initiative focused on economic empowerment for women in developing countries.

To build on our incredible economic success, one priority is paramount — reversing decades of calamitous trade policies.

We are now making it clear to China that after years of targeting our industries, and stealing our intellectual property, the theft of American jobs and wealth has come to an end.

Therefore, we recently imposed tariffs on $250 billion of Chinese goods — and now our Treasury is receiving billions of dollars a month from a country that never gave us a dime.  But I don’t blame China for taking advantage of us — I blame our leaders and representatives for allowing this travesty to happen.  I have great respect for President Xi, and we are now working on a new trade deal with China.  But it must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.

Another historic trade blunder was the catastrophe known as NAFTA.

I have met the men and women of Michigan, Ohio, Pennsylvania, Indiana, New Hampshire, and many other States whose dreams were shattered by NAFTA.  For years, politicians promised them they would negotiate for a better deal.  But no one ever tried — until now.

Our new U.S.-Mexico-Canada Agreement — or USMCA — will replace NAFTA and deliver for American workers:  bringing back our manufacturing jobs, expanding American agriculture, protecting intellectual property, and ensuring that more cars are proudly stamped with four beautiful words:  made in the USA.

Tonight, I am also asking you to pass the United States Reciprocal Trade Act, so that if another country places an unfair tariff on an American product, we can charge them the exact same tariff on the same product that they sell to us.

Both parties should be able to unite for a great rebuilding of America’s crumbling infrastructure.

I know that the Congress is eager to pass an infrastructure bill — and I am eager to work with you on legislation to deliver new and important infrastructure investment, including investments in the cutting edge industries of the future.  This is not an option.  This is a necessity.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2737.70 as this post is written