Category Archives: Uncategorized

Consumer Confidence Surveys – As Of March 28, 2017

Doug Short had a blog post of March 28, 2017 (“March Consumer Confidence Highest Since 2000“) 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 Confidence

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 2360.96 as this post is written

Markets During Periods Of Federal Reserve Intervention – March 27, 2017 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 March 27, 2017) from Doug Short’s blog post of January 20 (“Treasury Snapshot:  10-Year Note at 2.38“):

Federal Reserve Intervention and U.S. markets

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2359.64 as this post is written

Durable Goods New Orders – Long-Term Charts Through February 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 February 2017, updated on March 24, 2017. This value is $235,386 ($ 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:

DGORDER 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 March 24, 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 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 2353.87 as this post is written

‘Hidden’ Weakness In Consumer Spending?

Throughout this site there are many charts of economic indicators.  At this time, the readings of various indicators regarding consumer spending are especially notable.  While many are still indicating significant growth, are these indicators accurately portraying the overall situation?

Below are a small sampling of consumer spending charts that depict significant or at least stable degrees of growth, and a brief comment for each:

Retail Sales

Retail sales levels appear to be growing.  An overall long-term view is shown below, with current value (as of March 15, 2017) of $473,991 Million:

Retail and Food Service Sales

source:  U.S. Bureau of the Census, Retail and Food Services Sales [RSAFS], retrieved from FRED, Federal Reserve Bank of St. Louis March 18, 2017;

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

The same information provided on a “percent change from year ago” basis, with a current value of 5.7%:

Retail and Food Service Sales Percent Change From Year Ago

Lastly, a long-term chart with trendlines, as seen in the Doug Short post of March 15, 2017, titled “Retail Sales:  February Growth Continues to Improve, As Expected“:

Retail and Food Service Sales with trendlines

comment:  

As seen above, there doesn’t appear to be recent discernible weakness in the retail spending trend as seen in this “Retail and Food Services Sales” [RSAFS] measure.

Consumer Spending

While there are many ways to judge consumer spending, the Gallup measure for consumer spending (on a “self-reported” basis) shows higher levels relative to the post-2008, as shown below:

Gallup consumer spending through February 2017

source:  Gallup “US Consumers’ February Spending Highest Since 2008” March 6, 2017

GDP Estimates

While, of course, GDP encompasses more than consumer spending alone, current estimates of 2017 GDP remain at levels that would appear to be roughly consistent with the stable, significant spending depicted above.  For example, the Wall Street Journal Economic Forecast Survey of March 2017 (summarized in the March 16 post titled “The March 2017 Wall Street Journal Economic Forecast Survey“) shows a 2017 GDP estimate of 2.4%.  This is close to the Federal Reserve’s current (March 2017 FOMC Economic Projections (pdf)) median estimate of 2.1%.

As additional reference, the New York Federal Reserve’s GDP Nowcasting Report of March 17, 2017 shows a Q1 estimate of 2.8% for Q1 and 2.5% for Q2.

comment:  

As seen above, U.S. GDP expectations don’t appear to show discernible weakness in the trend.

Store Closings

Over the recent past there have been a substantial number of retail store closings.  While reliable statistics on the closings and announcements of such don’t appear to be readily available, the numbers – as well as the results posted by various retailers – appear to indicate a (highly) problematical trend.  The incidence and timing of such closings – in the face of seemingly solid overall retail spending, as discussed above – seem to indicate that some significant factor(s) are contributing to a decline in “bricks and mortar” retail sales.  As one might expect, the weakness appears to be largely effecting marginal stores at this point.

While many would attribute such weakness in “bricks and mortar” stores to online sales – and especially Amazon – is online sales the primary factor?  While – because of many factors – it is difficult to say with certainty, online sales is undoubtedly a factor in the physical store closures.  However, I believe that a greater factor is retail spending that is not as strong as the aggregate trends shown above.

The closure of retail stores is of great significance to the U.S. economy.  Retail stores factor into many aspects of economic and financial activity, as discussed in previous posts, including the June 13, 2011 post titled “The Changing Nature Of Retail – Economic Implications.”  The continued accelerating nature of online sales has many implications for the economy and businesses.

Along these lines, an excerpt with regard to the effect store closings have on small towns, as seen in The Wall Street Journal article of January 20, 2017, titled “Mall’s Woes Ripple Across Small Town“:

Malls in smaller U.S. cities are often linchpins of local economies and their struggles can have a ripple effect, from jobs and tax revenues to the fortunes of logistics and transportation companies that provide trucking and inventory support for stores. Creditors who invest in mortgage securities tied to troubled malls face the risk of default.

Lagging Retail Stocks

Another factor that seems to be indicating weakness in consumer spending is the ratio of retail stocks (XRT as a proxy) to the S&P500.  As seen in the 10-year chart below, XRT as a ratio to the S&P500 has been declining since roughly mid-2015:

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

XRT:S&P500 ratio

GDP Estimates – GDP Now

The GDP estimate provided by the Federal Reserve Bank of Atlanta “GDP Now” is distinctly different than that mentioned above.  As of the March 16, 2017 update, the estimate for the 1st Quarter of 2017 is .9%.  While this estimate – which has been steadily declining – may or may not prove accurate, such a level would appear to be at least somewhat inconsistent with the stable, significant aggregate retail spending depicted in the “Retail And Food Services Sales” and other measures mentioned above.

As well, many other indicators – some mentioned on this site – indicate weakness in economic growth if not outright (substantially) problematical economic conditions.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2348.45 as this post is written

Money Supply Charts Through February 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 March 17, 2017 depicting data through February 2017, with a value of $14,671.4 Billion:

MZMSL

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 5.8%:

MZMSL percent change from year ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 21, 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 March 16, 2017, depicting data through February 2017, with a value of $13,313.1 Billion:

M2SL

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 6.4%:

M2SL percent change from year ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 21, 2017:

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

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2373.47 as this post is written

10-Year Treasury Yields – Two Long-Term Charts As Of March 14, 2017

I have written extensively about U.S. interest rates and their importance.  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.

Lately interest rates, including the 10-Year Treasury yield, have been increasing.  An excerpt from the March 13, 2017 Wall Street Journal article titled “U.S. 10-Year Bond Yield Closes at Highest Level Since September 2014”:

The yield on the benchmark 10-year Treasury note closed Monday at the highest level in more than two years, deepening its rise this month as investors expect that the Federal Reserve will raise short-term interest rates later this week.

The yield on the 10-year note settled at 2.609%, compared with 2.582% Friday. It toppled the recent peak of 2.6% closed in mid-December and marked the highest close since September 2014. Yields rise as bond prices fall.

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)

TNX Monthly LOG since 1980

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

TNX Daily LOG since 2008

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2364.18 as this post is written

Average Hourly Earnings Trends

I have written many blog posts concerning the worrisome trends in income and earnings.

Along these lines, one of the measures showing disconcerting trends is that of hourly earnings.

While the concept of hourly earnings can be defined and measured in a variety of ways, below are a few charts that I believe broadly illustrate problematic trends.

The first chart depicts Average Hourly Earnings Of All Employees: Total Private (FRED series CES0500000003)(current value = $26.09):

(click on chart to enlarge image)(chart last updated 3-10-17)

CES0500000003_3-10-17

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of All Employees:  Total Private [CES0500000003] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed March 11, 2017:

http://research.stlouisfed.org/fred2/series/CES0500000003

This next chart depicts this same measure on a “Percentage Change From A Year Ago” basis.   While not totally surprising, I find the decline from 2009 and subsequent trend to be disconcerting:

(click on chart to enlarge image)(chart last updated 3-10-17)

CES0500000003_3-10-17 2.8 percent change from year ago

There are slightly different measures available from a longer-term perspective. Pictured below is another measure, the Average Hourly Earnings of Production and Nonsupervisory Employees – Total Private (FRED series AHETPI)(current value = $21.86):

(click on chart to enlarge image)(chart last updated 3-10-17)

AHETPI_3-10-17 21.86

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of Production and Nonsupervisory Employees:  Total Private [AHETPI] ; U.S. Department of Labor: Bureau of Labor Statistics;  accessed March 11, 2017:

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

Pictured below is this AHETPI measure on a “Percentage Change From A Year Ago” basis.   While not totally surprising, I find the decline from 2009 and subsequent trend to be disconcerting:

(click on chart to enlarge image)(chart last updated 3-10-17)

AHETPI_3-10-17 2.5 percent change from year ago

I will continue to actively monitor these trends, especially given the post-2009 dynamics.

_________

I post various economic 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 2372.60 this post is written

Total Household Net Worth As Of 4Q 2016 – Two Long-Term Charts

In the last post (“Total Household Net Worth As A Percent Of GDP 4Q 2016“) I displayed a long-term chart depicting Total Household Net Worth as a percentage of GDP.

For reference purposes, here is Total Household Net Worth from a long-term perspective (from 1945:Q4 through 2016:Q4).  The last value (as of the March 9, 2017 update) is $92.80541 Trillion:

(click on each chart to enlarge image)

TNWBSHNO_3-9-17 92805.41

Also of interest is the same metric presented on a “Percent Change from a Year Ago” basis:

TNWBSHNO_3-9-17 6.3 percent change from year ago

Data Source: FRED, Federal Reserve Economic Data, Board of Governors of the Federal Reserve System; accessed March 11, 2017:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2372.60 as this post is written

Total Household Net Worth As A Percent Of GDP 4Q 2016

The following chart is from the CalculatedRisk post of March 9, 2017 titled “Fed’s Flow of Funds:  Household Net Worth increased in Q4.” It depicts Total Household Net Worth as a Percent of GDP.  The underlying data is from the Federal Reserve’s Z.1 report, “Financial Accounts of the United States“:

(click on chart to enlarge image)

household net worth as a percentage of GDP

As seen in the above-referenced CalculatedRisk post:

Household net worth was at $92.8 trillion in Q4 2016, up from $90.8 trillion in Q3 2016.

The Fed estimated that the value of household real estate increased to $23.1 trillion in Q4. The value of household real estate is now above the bubble peak in early 2006 – but not adjusted for inflation, and also including new construction.

As I have written in previous posts concerning this Household Net Worth (as a percent of GDP) topic:

As one can see, the first outsized peak was in 2000, and attained after the stock market bull market / stock market bubbles and economic strength.  The second outsized peak was in 2007, right near the peak of the housing bubble as well as near the stock market peak.

also:

I could extensively write about various interpretations that can be made from this chart.  One way this chart can be interpreted is a gauge of “what’s in it for me?” as far as the aggregated wealth citizens are gleaning from economic activity, as measured compared to GDP.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2372.60 as this post is written

Broad-Based Indicators Of Economic Activity

The Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index) are two broad-based economic indicators that I regularly feature in this site.

The short-term and long-term trends of each continue to be notable.

Doug Short, in his blog post of March 6, 2017, titled “The Philly Fed ADS Index Business Conditions Index Update” displays both the CFNAI MA-3 (3-month Moving Average) and ADS Index (91-Day Moving Average) from a variety of perspectives.

Of particular note, two of the charts, shown below, denote where the current levels of each reading is relative to the beginning of past recessionary periods, as depicted by the red dots.

The CFNAI MA-3:

(click on charts to enlarge images)

CFNAI-MA3

The ADS Index, 91-Day MA:

ADS Index

Also shown in the Doug Short’s aforementioned post is a chart of each with a long-term trendline (linear regression) as well as a chart depicting GDP for comparison purposes.

_________

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 2377.16 as this post is written