Tag Archives: economic weakness

Charts Indicating Economic Weakness – February 2018

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.  The Gross Domestic Product Q4 2017 Advance Estimate (pdf) of January 26, 2018 was 2.6%, and as seen in the February 2018 Wall Street Journal Economic Forecast Survey the consensus among various economists is for 2.8% GDP growth in 2018.  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 greater degrees of weakness and/or other worrisome trends, and a brief comment for each:

Total Private Construction Spending

Various measures of construction continue to show weak growth and/or contraction.

“Total Private Construction Spending” through December had a last value of $963,247 Million.  Shown below is the measure displayed on a “Percent Change From Year Ago” basis with value 2.1%, last updated February 1, 2018:

TLPRVCONS Percent Change From Year Ago

source:  U.S. Bureau of the Census, Total Private Construction Spending [TLPRVCONS], retrieved from FRED, Federal Reserve Bank of St. Louis accessed February 9, 2018:

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

Total Federal Receipts

“Total Federal Receipts” growth continues to be intermittent in nature since 2015.

“Total Federal Receipts” through January had a last value of $361,038 Million.  Shown below is  displayed on a “Percent Change From Year Ago” basis with value 4.9%, last updated February 12, 2018:

Monthly Total Federal Receipts

source:  U.S. Department of the Treasury. Fiscal Service, Total Federal Receipts [MTSR133FMS], retrieved from FRED, Federal Reserve Bank of St. Louis February 12, 2018:

https://fred.stlouisfed.org/series/MTSR133FMS

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Commercial And Industrial Loans, All Commercial Banks

“Commercial And Industrial Loans, All Commercial Banks” through January had a last value of $2126.943 Billion.  Shown below is the measure displayed on a “Percent Change From Year Ago” basis with value 1.2%, last updated February 9, 2018:

BUSLOANS_2-9-18 Percent Change From Year Ago

source:  Board of Governors of the Federal Reserve System (US), Commercial and Industrial Loans, All Commercial Banks [BUSLOANS], retrieved from FRED, Federal Reserve Bank of St. Louis February 9, 2018:

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

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Employment

I have written extensively concerning unemployment, as the current and future unemployment issue is of tremendous importance.

The consensus belief is that employment is robust, citing total nonfarm payroll growth and the current unemployment rate of 4.1%.  However, my analyses continue to indicate that the conclusion that employment is strong is incorrect.  Of particular note is the unemployment rate, which indicates that unemployment is (very) low.  Closer examination indicates that this metric is, for a number of reasons, highly misleading.

My analyses indicate that the underlying dynamics of the unemployment situation remain exceedingly worrisome, especially with regard to the future.  These dynamics are numerous and complex, and greatly lack recognition and understanding, especially as how from an “all-things-considered” standpoint they will progress in an economic and societal manner.  I have recently written of the current and future U.S. employment situation on the “U.S. Employment Trends” page.

While there are many charts that can be shown, one that depicts a worrisome trend is the Civilian Labor Force Participation Rate for those with Bachelor’s Degrees and Higher, Ages 25 and Above.  The current value as of the February 2, 2018 update (reflecting data through the January employment report) is 73.4%:

LNS11327662

source:  U.S. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: Bachelor’s Degree and Higher, 25 years and over [LNS11327662], retrieved from FRED, Federal Reserve Bank of St. Louis, February 9, 2018:

https://fred.stlouisfed.org/series/LNS11327662

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Productivity Measures

While I have expressed concerns about the overall definitions and value of productivity measures in the past, I do find the current-era trends to be disconcerting.

One such chart that shows a subdued level of a productivity measure is that of “Manufacturing, Real Output Per Hour.” Through the fourth quarter the last value was 109.101.  Shown below is the measure displayed on a “Percent Change From Year Ago” basis with value 1.1%, last updated February 1, 2018:

OPHMFG Percent Change From Year Ago

source:  U.S. Bureau of Labor Statistics, Manufacturing Sector: Real Output Per Hour of All Persons [OPHMFG], retrieved from FRED, Federal Reserve Bank of St. Louis February 12, 2018:

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

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Other Indicators

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2656.00 as this post is written

Charts Indicating Economic Weakness – December 2017

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 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.  The Gross Domestic Product Q3 2017 Second Estimate (pdf) of November 29, 2017 was 3.1%, and as seen in the November 2017 Wall Street Journal Economic Forecast Survey the consensus among various economists is for 2.5% GDP growth in 2017 & 2018.  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.

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each:

Total Private Construction Spending

Various measures of construction continue to show weak growth and/or contraction.

Shown below is “Total Private Construction Spending,” through October with last value of $949,946 Million, displayed on a “Percent Change From Year Ago” basis with value 3.2%, last updated December 1, 2017:

Total Private Construction Spending

source:  U.S. Bureau of the Census, Total Private Construction Spending [TLPRVCONS], retrieved from FRED, Federal Reserve Bank of St. Louis accessed December 6, 2017:

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

Total Federal Receipts

“Total Federal Receipts” growth continues to be intermittent in nature.

Shown below is “Total Federal Receipts,” through October with last value of $235,341 Million, displayed on a “Percent Change From Year Ago” basis with value 6.2%, last updated November 13, 2017:

Total Federal Receipts 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 December 6, 2017:

https://fred.stlouisfed.org/series/MTSR133FMS

Manufacturer’s New Orders – Durable Goods

Shown below is “Manufacturer’s New Orders -Durable Goods,” through October with last value of $237,375 Million, displayed on a “Percent Change From Year Ago” basis with value 1.6%, last updated December 4, 2017:

Durable Goods New Orders Percent Change From Year Ago

source:  U.S. Bureau of the Census, Manufacturers’ New Orders: Durable Goods [DGORDER], retrieved from FRED, Federal Reserve Bank of St. Louis December 6, 2017:

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

Commercial And Industrial Loans, All Commercial Banks

Shown below is “Commercial And Industrial Loans, All Commercial Banks” through October with last value of $2,122.6193 Billion, displayed on a “Percent Change From Year Ago” basis with value of 1.2%, last updated December 1, 2017:

Commercial And Industrial Loans Percent Change From Year Ago

source:  Board of Governors of the Federal Reserve System (US), Commercial and Industrial Loans, All Commercial Banks [BUSLOANS], retrieved from FRED, Federal Reserve Bank of St. Louis December 6, 2017:

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

The Yield Curve

Many people believe that the Yield Curve is a leading economic indicator for the United States economy.

On March 1, 2010, I wrote a post on the issue, titled “The Yield Curve As A Leading Economic Indicator.”

While I continue to have the above-stated reservations regarding the “yield curve” as an indicator, I do believe that it should be monitored.

Below is a yield-curve proxy chart showing the spread between the 10-Year Treasury and 2-Year Treasury using constant maturity securities.  This daily chart is from June 1, 1976 through December 7, 2017, with recessionary periods shown in gray. This chart shows a value of .57%:

T10Y2Y_12-8-17

source:  Federal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity [T10Y2Y], retrieved from FRED, Federal Reserve Bank of St. Louis December 10, 2017:

https://research.stlouisfed.org/fred2/series/T10Y2Y

Population Growth

Shown below is a long-term chart of population growth on a “Percent Change From A Year Ago” basis with value .7%.  The declining nature of the growth rate is notable and may in itself may deserve consideration as an economic indicator:

Total Population Percent Change From Year Ago

source:  U.S. Bureau of the Census, Total Population: All Ages including Armed Forces Overseas [POP], retrieved from FRED, Federal Reserve Bank of St. Louis December 10, 2017:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2659.99 as this post is written

Charts Indicating Economic Weakness – November 2017

Throughout this site there are many discussions of economic indicators.  At this time, the readings of various indicators are especially notable.

While many U.S. economic indicators – including GDP – are indicating economic growth, others depict (or imply) various degrees of weak growth or economic contraction.

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each:

Overall Economic Activity

While the Gross Domestic Product Q3 2017 Advance Estimate (pdf) of October 27, 2017 was 3.0%, and as seen in the November 2017 Wall Street Journal Economic Forecast Survey the consensus among various economists is for 2.5% GDP growth in 2017 & 2018, 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.

Among the broad-based economic indicators that have been implying weaker growth or mild contraction is the Chicago Fed National Activity Index (CFNAI).

The Chicago Fed National Activity Index (CFNAI) updated as of October 23, 2017:

The CFNAI, with the October 23, 2017 reading of .17:

CFNAI 10-23-17 .17

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, November 16, 2017;

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

An ancillary measure of the Chicago Fed National Activity Index (CFNAI) – the Chicago Fed National Activity Diffusion Index (CFNAIDIFF) – updated as of October 23, 2017:

The CFNAIDIFF, with current reading of -.19:

CFNAIDIFF 10-23-17 -.19

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index:  Diffusion Index [CFNAIDIFF], retrieved from FRED, Federal Reserve Bank of St. Louis, November 16, 2017;

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

Rail Freight Carloads

Another notable measure is that of “Rail Freight Carloads,” as depicted below, through September with last value of 1,086,482, last updated November 16, 2017:

Rail Freight Carloads

source:  U.S. Bureau of Transportation Statistics, Rail Freight Carloads [RAILFRTCARLOADSD11], retrieved from FRED, Federal Reserve Bank of St. Louis;  November 16, 2017:

https://fred.stlouisfed.org/series/RAILFRTCARLOADSD11

Here is the same measure on a “Percent Change From Year Ago” basis:

Rail Freight Carloads Percent Change From Year Ago

The Yield Curve

Many people believe that the Yield Curve is a leading economic indicator for the United States economy.

On March 1, 2010, I wrote a post on the issue, titled “The Yield Curve As A Leading Economic Indicator.”

While I continue to have the above-stated reservations regarding the “yield curve” as an indicator, I do believe that it should be monitored.

As an indication of the yield curve (i.e. a yield curve proxy), below is a weekly chart from January 1, 1990 through November 17, 2017.  The top two plots show the 10-Year Treasury and 2-Year Treasury yields.  The third plot shows the (yield) spread between the 10-Year Treasury and 2-Year Treasury, with the November 17, 2017 closing value of .62%.  The bottom plot shows the S&P500:

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

U.S. Yield Curve proxy

Domestic Auto Production

Another notable measure is that of “Domestic Auto Production,” defined in FRED as:

Domestic auto production is defined as all autos assembled in the U.S.

Here is “Domestic Auto Production,” depicted below on a “Percent Change From Year Ago” basis, through September with last value of -34.2 Percent, last updated October 30, 2017:

U.S. Domestic Auto Production Percent Change From Year Ago

source:  U.S. Bureau of Economic Analysis, Domestic Auto Production [DAUPSA], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed November 15, 2017:

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

Inflation/Deflation Trends

Current inflation levels and the possibility of deflation  is a vastly complex topic, and as such isn’t suitably discussed in a brief manner.  I have discussed the issue of deflation extensively as I continue to believe that prolonged and deep U.S. deflationary conditions are on the horizon, and that such deflationary conditions will cause, as well as accompany, inordinate economic hardship. [note: to clarify, for purposes of this discussion, when I mention “deflation” I am referring to the CPI going below zero. Also, I have been using the term “deflationary pressures” as a term to describe deflationary manifestations within an environment that is still overall inflationary but heading towards deflation.]

My latest commentary regarding deflationary pressures and future deflation can be found in the October 2 post titled “Charts Indicating Economic Weakness – October 2017.”

Other Indicators

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2578.85 as this post is written

Charts Indicating Economic Weakness – October 2017

Throughout this site there are many discussions of economic indicators.  At this time, the readings of various indicators are especially notable.

While many U.S. economic indicators – including GDP – are indicating economic growth, others depict (or imply) various degrees of weak growth or economic contraction.

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each:

Overall Economic Activity

While the recently-released 2nd quarter GDP (Third Estimate)(pdf) was 3.1%, 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.

Currently, the consensus opinion for near-term growth is that the recent hurricanes will serve to depress economic growth.  As Janet Yellen stated at the September 20 FOMC Press Conference:

In the third quarter, however, economic growth will be held down by the severe disruptions caused by Hurricanes Harvey, Irma, and Maria.  As activity resumes and rebuilding gets underway, growth likely will bounce back.  Based on past experience, these effects are unlikely to materially alter the course of the national economy beyond the next couple of quarters.

There has been a (very) significant lowering of estimates for 3rd Quarter GDP growth.  This can be seen in various estimates, including the Federal Reserve Bank of Atlanta’s GDP Now (September 29 estimate of 2.3%) as well as the Federal Reserve Bank of New York’s Nowcast (September 29 estimate of 1.5%.)

However, is the recent reduction in economic growth estimates indeed due to the hurricanes?  There are many reasons to believe that overall weakening economic growth and/or contraction in some economic measures had been occurring previous to the hurricanes.

Among the broad-based economic indicators that have been implying weaker growth or mild contraction is the Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index).

As seen in the charts shown below, such trends have been in existence for a number of months:

The September 2017 Chicago Fed National Activity Index (CFNAI) updated as of September 25, 2017:

The CFNAI, with current reading of -.31:

CFNAI_9-25-17 -.31

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, September 25, 2017;

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

The ADS Index, from the year 2000 through September 16, 2017:

 

ADS Index

Inflation Trends

Current inflation levels and the possibility of deflation  is a vastly complex topic, and as such isn’t suitably discussed in a brief manner.  I have discussed the issue of deflation extensively as I continue to believe that prolonged and deep U.S. deflationary conditions are on the horizon, and that such deflationary conditions will cause, as well as accompany, inordinate economic hardship. [note: to clarify, for purposes of this discussion, when I mention “deflation” I am referring to the CPI going below zero. Also, I have been using the term “deflationary pressures” as a term to describe deflationary manifestations within an environment that is still overall inflationary but heading towards deflation.]

Of note, the shortfall between the Federal Reserve’s stated inflation target (2% on the (Core) PCE Price Index) and the actual inflation reading continues.  For years there has been a continued inability for the 2% inflation target to be sustained.

Below is a chart of the “Core PCE” price measure as of the September 29, 2017 update, showing data through August, with a current reading of 1.3%:

PCEPILFE_9-29-17 1.3 Percent Change From Year Ago

source:  U.S. Bureau of Economic Analysis, Personal Consumption Expenditures Excluding Food and Energy (Chain-Type Price Index) [PCEPILFE], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed October 1, 2017:

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

While there appears (as seen in forecasts and surveys) to be little if any general concern about deflation, recent commentary, including that from Janet Yellen in the September 20 FOMC Press Conference and in the September 26 speech concerning inflation is notable.  A couple of excerpts from the September 26 speech titled “Inflation, Uncertainty, And Monetary Policy” (pdf):

As I will discuss, this low inflation likely reflects factors whose influence should fade over time.  But as I will also discuss, many uncertainties attend this assessment, and downward pressures on inflation could prove to be unexpectedly persistent.  My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation.

also:

Based on analyses of this sort, my colleagues and I currently think that this year’s low inflation is probably temporary, so we continue to anticipate that inflation is likely to stabilize around 2 percent over the next few years.  But our understanding of the forces driving inflation is imperfect, and we recognize that something more persistent may be responsible for the current undershooting of our longer-run objective.  Accordingly, we will monitor incoming data closely and stand ready to modify our views based on what we learn.

Although we judge that inflation will most likely stabilize around 2 percent over the next few years, the odds that it could turn out to be noticeably different are considerable.

Consumer Spending

In the March 23, 2017 post (“‘Hidden’ Weakness In Consumer Spending?“) I wrote of various indications that consumer spending may be (substantially) less than what is depicted by various mainstream indicators, including overall retail sales.  This weakness (including the implications stemming from the substantial number of retail store closures) has widespread consequences for the U.S. economy as discussed in previous posts, including the June 13, 2011 post titled “The Changing Nature Of Retail – Economic Implications.”

While I continue to believe that the various retail sales figures are overstated, one tangential long-term indicator that is notable in its current trend is that of “All Employees:  Retail Trade” as depicted below on a “Percent Change From Year Ago” basis, through August with last value of -.2 Percent, last updated September 1, 2017:

All Employees: Retail Trade percent change from year ago

source:  U.S. Bureau of Labor Statistics, All Employees: Retail Trade [USTRADE], retrieved from FRED, Federal Reserve Bank of St. Louis; September 29, 2017:

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

Another worrisome aspect is the peaking in auto sales and the (current-era) dynamics and structure of the auto industry with the accompanying widespread economic implications.

Rail Freight Carloads

Another notable measure is that of “Rail Freight Carloads,” as depicted below, through July with last value of 1,099,399, last updated September 15, 2017:

U.S. Rail Freight Carloads

source:  U.S. Bureau of Transportation Statistics, Rail Freight Carloads [RAILFRTCARLOADSD11], retrieved from FRED, Federal Reserve Bank of St. Louis;  September 29, 2017:

https://fred.stlouisfed.org/series/RAILFRTCARLOADSD11

Here is the same measure on a “Percent Change From Year Ago” basis:

U.S. Rail Freight Carloads Percent Change From Year Ago

Other Indicators

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2519.36 as this post is written

Charts Indicating Economic Weakness – September 2017

Throughout this site there are many discussions of economic indicators.  At this time, the readings of various indicators are especially notable.

While many U.S. economic indicators – including GDP – are indicating economic growth, others depict (or imply) various degrees of weak growth or economic contraction.

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each:

Overall Economic Activity

While the recently-released 2nd quarter GDP figure (Second Estimate) was 3.0%, 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.

Among the broad-based economic indicators that imply weaker growth is that of the Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index), both featured in the August 17, 2017 post titled “Broad-Based Indicators Of Economic Activity.”  Below is a chart of the CFNAI, as of August 21, 2017:

CFNAI

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed September 3, 2017:

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

Another facet of economic activity is seen in the ratio of the  Conference Board’s Coincident Composite Index to the Lagging Composite Index.  I interpret the trends seen in this measure to be disconcerting, as the ratio has generally been sinking for years:

Conference Board Coincident Composite Index To Lagging Composite Index Ratio

source:  Haver’s August 17, 2017 post (“Widespread Gain for U.S. Leading Economic Indicators in July“)

Consumer Spending

In the March 23, 2017 post (“‘Hidden’ Weakness In Consumer Spending?“) I wrote of various indications that consumer spending may be (substantially) less than what is depicted by various mainstream indicators, including overall retail sales.  This weakness has widespread consequences for the U.S. economy, including the implications stemming from the substantial number of retail store closures.

There are many indications of retail weakness, including various stock charts.  One is the underperformance of retailers to the overall stock market, as seen in the ratio of retail stocks (XRT as a proxy) to the S&P500.  As seen below, XRT as a ratio to the S&P500 (bottom plot) 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:SPX chart

Another worrisome aspect is the peaking in auto sales, with the accompanying widespread economic implications.

Construction Activity

Various construction measures are indicating lesser levels – if not contraction – of activity.

Among the most concerning charts is that for Total Nonresidential Construction Spending, on a “Percent Change From Year Ago” basis, as seen below: (current reading (through July) is $688,419 million):

Total Nonresidential Construction Percent Change From Year Ago

source: U.S. Bureau of the Census, Total Construction Spending: Nonresidential [TLNRESCONS], retrieved from FRED, Federal Reserve Bank of St. Louis;  accessed September 5, 2017;

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

Inflation Trends

Current inflation levels and the possibility of deflation (when the CPI goes below zero) is a vastly complex topic, and as such isn’t suitably discussed in a brief manner.  I have discussed the issue of deflation extensively as I continue to believe that outright sustained deflation will occur, with wide-ranging economic implications.  As I have stated in past commentaries, my analyses indicate that surveys or “market-based” measures concerning deflation will provide adequate “advance warning” of this deflation.

For reference, here is the “Core PCE” measure as of the August 31, 2017 update, showing data through July, with a current reading of 1.4%:

Core PCE inflation chart

source:  U.S. Bureau of Economic Analysis, Personal Consumption Expenditures Excluding Food and Energy (Chain-Type Price Index) [PCEPILFE], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed September 6, 2017:

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

Other Indicators

As mentioned previously, many other indicators discussed on this site indicate economic weakness if not outright (substantially) problematical economic conditions.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2457.85 as this post is written

Charts Indicating Economic Weakness – April 12, 2017

Throughout this site there are many charts of economic indicators.  At this time, the readings of various indicators are especially notable.  While many are still indicating economic growth, others depict (or imply) various degrees of weakness.

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each:

Consumer Spending

In the March 23, 2017 post (“‘Hidden’ Weakness In Consumer Spending?“) I wrote of various indications that consumer spending may be (substantially) less than what is depicted by various mainstream indicators.  There are widespread consequences for the U.S. economy, including the implications regarding the substantial number of retail store closures.

Auto Sales

One aspect of consumer spending, auto sales, have experienced significant growth over the post-2009 period, and the current reading (through March) is 16.529 million vehicles:

Light vehicle sales

source:  U.S. Bureau of Economic Analysis, Light Weight Vehicle Sales: Autos and Light Trucks [ALTSALES], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed April 10, 2017:

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

While some believe that auto sales have peaked, what is more worrisome is various underlying dynamics of these sales.  While an exhaustive discussion of such dynamics would be exceedingly lengthy, various notable factors include the degree to which (ultra-) cheap financing and relaxed financing terms are aiding sales, as well as the current amount of discounting and various new- and used-car inventory levels.  In essence, the current business model for the entire automotive industry appears vulnerable, with wide-ranging, substantial economic implications.

Heavy Truck Sales

Another area of vehicle sales which continues to indicate disconcerting trends is sales of Heavy Trucks, defined as trucks with more than 14,000 pounds gross vehicle weight.  Below is a chart of the sales trend since 1968, with a value of .366 million SAAR through March 2017 as of the April 10 update:

Heavy Truck Sales

source:  U.S. Bureau of Economic Analysis, Motor Vehicle Retail Sales: Heavy Weight Trucks [HTRUCKSSAAR], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed April 10, 2017:

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

A chart depicting this measure on a “Percent Change From Year Ago” basis:

Heavy Truck Sales Percent Change From Year Ago

GDP Estimates

While there are many GDP forecasts indicating GDP growth exceeding 2% for 2017, the first quarter GDP estimate provided by the Federal Reserve Bank of Atlanta “GDP Now” is distinctly different than the consensus.  As of the April 7, 2017 update, the estimate for the 1st Quarter of 2017 is .6%.

What is notable in this estimate is the persistent and significant degree of decline.

While I don’t believe in putting undue emphasis on one estimate, it does serve as yet another indication that economic activity may be (substantially) below the consensus estimates.

“Reflation”

One aspect of the U.S. economy that has been widely discussed since the November 2016 elections is that of “reflation.”

While, on an aggregate basis, some “reflation” appears to have recently occurred, it appears to be muted in nature.  In addition, various factors indicate that such “reflation” will be transitory in nature.

Indications of the above are various, and include the persistently subdued 10-Year Treasury Yield (at 2.361% as of the April 10 close) and the levels seen in the yield curve.

Here is a chart of the 10-Year Treasury Yield, from 1990:

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

10-Year Treasury Yield since 1990

The level of current inflation and the possibility of deflation (when the CPI goes below zero) is a vastly complex topic, and as such isn’t suitably discussed in a brief manner.  I have discussed the issue of deflation extensively as I continue to believe that outright sustained deflation will occur.  As I have stated in past commentaries, I don’t believe that surveys or “market-based” measures concerning deflation will provide adequate “advance warning” of impending deflation.

Other Indicators

As well, many other indicators – including vastly problematical conditions in current and especially future employment – and other areas mentioned on this site indicate economic weakness if not outright (substantially) problematical economic conditions.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2353.78 as this post is written

Charts Indicating Economic Weakness – October 18, 2016

Throughout this site there are many charts of economic indicators.  At this time, the readings of these various indicators are especially notable.  While many are still indicating economic growth, others depict (or imply) various degrees of economic weakness.

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each:

Economic Activity

While there are many indicators that gauge – and/or predict – economic activity, among the most prominent (although far less universally discussed than GDP) is the Chicago Fed National Activity Index (CFNAI).  Here is the measure displayed as a 3-month moving average (CFNAI-MA3), last updated on September 22, 2016:

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 https://research.stlouisfed.org/fred2/series/CFNAIMA3/, October 17, 2016.

comment:  

What I find especially notable about the post-June 2009 readings (i.e. the current post-recession period) is how the CFNAI-MA3 has spent a considerable amount of time below zero.  As well, the readings above zero have been relatively muted.  Both of these facets contrast previous periods of economic expansion, as seen between the vertical gray areas that depict officially-designated recessions.

Manufacturing

Many indications of weakness in manufacturing have been featured on this site.  One area that continues to indicate problematical conditions is the seemingly (very) high levels of inventory, as seen in various measures, such as Total Business:  Inventories to Sales Ratio, last updated October 14, 2016:

Inventory to Sales Ratio

Source:  US. Bureau of the Census, Total Business: Inventories to Sales Ratio [ISRATIO], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed October 17, 2016:

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

comment:  

It should be interesting to monitor this trend going forward.  Of course, the most “painless” way to resolve high levels of inventory is to have a strong upswing in sales.  Is that what businesses as a whole are predicting, or are there other factors at play?  Another perspective – albeit non-conventional in nature, is this same ISRATIO measure shown on a “Percent Change From Year Ago” measure, as seen below:

ISRATIO Percent Change From Year Ago

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Employment

Labor Force Participation Rate (last updated 10-7-16; value of 62.9%):

Civilian Labor Force Participation Rate

comment:

I have written extensively concerning unemployment, as the current and future unemployment issue is of tremendous importance.

The consensus belief is that employment is robust, citing total nonfarm payroll growth and the current unemployment rate of 5.0%.  However, my analyses continue to indicate that the consensus interpretation of both of these metrics and the conclusion that employment is strong is incorrect.  Of particular note is the unemployment rate, which indicates that unemployment is (very) low.  Closer examination indicates that this metric is, for a number of reasons, highly misleading.

My analyses indicate that the underlying dynamics of the unemployment situation, including that of the Labor Force Participation Rate shown above, remain exceedingly worrisome, especially with regard to the future.  These dynamics are numerous and complex, and greatly lack recognition and understanding, especially as how, from an “all-things-considered” standpoint they will progress in an economic and societal manner.

While I don’t believe that the Federal Reserve’s Labor Market Conditions Index (LMCI) is an accurate portrayal of the overall employment situation, it is notable in that, as opposed to the Unemployment Rate and Total Nonfarm Payrolls statistics, it appears to be indicating weakness. The LMCI is described as being “derived from a dynamic factor model that extracts the primary common variation from 19, seasonally-adjusted, labor market indicators.”  A reference document is seen in the May 22, 2014 document titled “Assessing the Change in Labor Market Conditions.”

An interesting question was asked with regard to this metric in the June 15, 2016 FOMC Press Conference.  Here is an excerpt from Janet Yellen’s response, as seen in the “Janet Yellen’s June 15, 2016 Press Conference:  Notable Aspects” post:

Well, let me just say the Labor Market Conditions Index is a kind of experimental research product that’s a summary measure of many different indicators and essentially that measure tries to assess the change in the labor market conditions. As I look at it and as that index looks at things, the state of the labor market is still healthy, but there’s been something of a loss of momentum.

Here is a chart of the LMCI, as of the latest (October 11, 2016) update showing a -2.2 reading:

FRBLMCI

source:  Board of Governors of the Federal Reserve System (US), Change in Labor Market Conditions Index [FRBLMCI], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed October 17, 2016:

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

Another interesting facet concerning employment levels is that of the relationship between capacity utilization and the unemployment rate.  (note: This is discussed in “On The Economy” (Federal Reserve Bank of St. Louis) in an October 13, 2016 post titled “Employment, Capacity Utilization and Business Cycles“)

Capacity Utilization and the Unemployment Rate

While there are undoubtedly many factors that influence this relationship, I find the recent divergence between the two measures to be notable.  Another notable aspect is the low (on an absolute basis from a long-term historical perspective) and declining level of Capacity Utilization.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2126.50 as this post is written

Charts Indicating Economic Weakness – May 10, 2016

Throughout this site there are many charts of economic indicators.  At this time, the readings of these various indicators are especially notable.  While many are still indicating economic growth, others depict (or imply) various degrees of economic weakness.  Perhaps most prominent among those indicating economic growth is the First Quarter 2016 “Advance Estimate” of GDP (pdf) at 0.5%.

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each.

Manufacturing

As depicted by this chart showing various Federal Reserve Regional Manufacturing Indexes, there has been weakness in the recent readings:

Federal Reserve Regional Manufacturing 3-Month Moving Averages

source: Doug Short’s post of April 29, 2016, “Regional Fed Overview:  April Still Negative, but Continuing to Decline.”

comment:  

Various manufacturing statistics have recently been showing weakness.  This is seen in many metrics, including the various Federal Reserve regional manufacturing surveys.

Other aspect of manufacturing trends, as seen in various indicators, include the Value of Manufacturers’ New Orders for Consumer Goods Industries, last updated May 4, 2016:

Value of Manufacturers' New Orders for Consumer Goods Industries

source:  US. Bureau of the Census, Value of Manufacturers’ New Orders for Consumer Goods Industries [ACOGNO], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed May 8, 2016:

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

Here is the same measure on a “Percent Change From Year Ago” basis:

ACOGNO Percent Change From Year Ago

An additional concern is the seemingly (very) high levels of inventory, as seen in various measures, such as Total Business:  Inventories to Sales Ratio, last updated April 13, 2016:

ISRATIO

Source:  US. Bureau of the Census, Total Business: Inventories to Sales Ratio [ISRATIO], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed May 9, 2016:

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

__

Employment

Labor Force Participation Rate (last updated 5-6-16; value of 62.8%):

civilian labor force participation rate

source:  US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [CIVPART], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed May 9, 2016:

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

comment:

I have written extensively concerning unemployment, as the current and future unemployment issue is of tremendous importance.

The consensus belief is that employment is robust, citing total nonfarm payroll growth and the current unemployment rate of 5.0%.  However, my analyses indicate that the consensus interpretation of both of these metrics and the conclusion that employment is strong is incorrect.  Of particular note is the unemployment rate, which indicates that unemployment is (very) low.  Closer examination indicates that this metric is, for a number of reasons, highly misleading.

My analyses indicate that the underlying dynamics of the unemployment situation, including that of the Labor Force Participation Rate shown above, remain exceedingly worrisome, especially with regard to the future.  These dynamics are numerous and complex, and greatly lack recognition and understanding, especially as how, from an “all-things-considered” standpoint they will progress in an economic and societal manner.

While I don’t believe that the Federal Reserve’s Labor Market Conditions Index (LMCI) is an accurate portrayal of the overall employment situation, it is notable in that, as opposed to the Unemployment Rate and Total Nonfarm Payrolls statistics, it appears to be indicating weakness. The LMCI is described as being “derived from a dynamic factor model that extracts the primary common variation from 19, seasonally-adjusted, labor market indicators.”  A reference document is seen in the May 22, 2014 document titled “Assessing the Change in Labor Market Conditions.”

The latest update (as of May 9, 2016) is seen below:

Labor Market Conditions Index

source:  Board of Governors of the Federal Reserve System (US), Change in Labor Market Conditions Index [FRBLMCI], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed May 9, 2016:

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

__

Inflation Trends

The below chart shows inflation, as depicted by the PCE Price Index:

PCE Index

source: Doug Short’s April 29, 2016 PCE Update

comment:

As depicted above, the shortfall between the Federal Reserve’s stated inflation target (2% on the PCE Price Index) and the actual inflation reading continues.  The level of current inflation and the possibility of deflation is a vastly complex topic, and as such isn’t suitably discussed in a brief manner.  I have discussed the issue of deflation extensively as I continue to believe that outright sustained deflation will occur.  As I have stated in past commentaries, I don’t believe that surveys or “market-based” measures concerning deflation will provide adequate “advance warning” of impending deflation.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2071.84 as this post is written

Charts Indicating Economic Weakness

Throughout this site there are many charts of economic indicators.  At this time, the readings of these various indicators are especially notable.  While many are indicating economic growth, others depict (or imply) various degrees of economic weakness.

Below are a small sampling of charts that depict greater degrees of weakness and/or worrisome trends, and a brief comment for each.  (note: additional economic commentary is seen throughout this EconomicGreenfield.com site)

New York Federal Reserve Empire State Manufacturing Survey:

Empire State Manufacturing Survey

source: Doug Short’s post of January 15, 2016, “Empire State Manufacturing Disappoints Forecast, Declined at Fastest Pace Since Recession.”

comment:  

Various manufacturing statistics have recently been showing weakness.  This is seen in many metrics, including the various Federal Reserve regional manufacturing surveys, such as the New York Federal Reserve Empire State Manufacturing Survey depicted above.

The ratio of the  Conference Board’s Coincident Composite Index to the Lagging Composite Index:

Conference Board Coincident to Lagging ratio

source:  Haver’s December 17, 2015 post (“U.S. Leading Indicators Continue To Rise“)

comment:

As depicted by the above chart the ratio of the Coincident Composite Index to the Lagging Composite Index has been sinking for years, and is not far from the lows seen in the chart.

Labor Force Participation Rate (last updated 1-8-16; value of 62.6%):

labor force participation rate

source:  US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [CIVPART], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CIVPART/, January 13, 2016.

comment:

I have written extensively concerning unemployment, as the current and future unemployment issue is of tremendous importance.  While the current unemployment rate is 5.0% – which would indicate unemployment is (very) low – closer examination indicates that this metric is, for a number of reasons, highly suboptimal.

The underlying dynamics of the unemployment situation, including that of the Labor Force Participation Rate shown above, remain exceedingly worrisome.    These dynamics are numerous and complex, and greatly lack recognition and understanding, especially as how, from an “all-things-considered” standpoint they will progress in an economic and societal manner.

Inflation, as depicted by the PCE Price Index:

PCE Index

source: Doug Short’s December 23, 2015 PCE Update

comment:

As depicted above, the shortfall between the Federal Reserve’s stated inflation target (2% on the PCE Price Index) and the actual inflation reading continues.  The level of current inflation and the possibility of deflation is a vastly complex topic, and as such isn’t suitably discussed in a brief manner; however, I continue to believe that outright sustained deflation will occur.

Inflation Expectations, as depicted by the “10-Year Breakeven Inflation Rate” (updated  as of January 15, 2016, with a value of 1.43%)

10-Year Breakeven Inflation Rate

source:  Federal Reserve Bank of St. Louis, 10-Year Breakeven Inflation Rate [T10YIE], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed January 18, 2016; https://research.stlouisfed.org/fred2/series/T10YIE/

comment:

There are many measures of inflation expectations, broadly categorized into two groups – “market-based” measures (such as that seen above) and surveys concerning expected inflation.

Current readings of the “market-based” and future inflation surveys range from steady to – as seen in the “10-Year Breakeven Inflation Rate” chart above – declining.

As I stated in the “U.S. Deflation – September 21, 2015” commentary:

While neither the inflation surveys or “market-based” measures depict a deflationary situation – or provide strong indications of impending deflation – is it correct to assume that they would?  For many reasons I don’t believe that they will provide significant “advance” warning of impending deflation.

“Deflationary Pressures,” as seen in the Bloomberg Commodity Index:

Bloomberg Commodity Index

source:  chart courtesy of StockCharts.com; chart creation and annotation by the author

comment:

I have discussed “deflationary pressures” extensively, in part because I continue to believe that the many continuing signs of “deflationary pressures” is a foreboding to actual U.S. deflation.  The sudden, severe and unexpected decline in commodities, as depicted by the Bloomberg Commodity Index above, is one of an array of indicators that depict deflationary pressures.

For comparison, one can compare the above indicators to that of various broad-based measures of economic activity, such as the Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index).  These were depicted in the January 15, 2016 post titled “Broad-Based Indicators Of Economic Activity.”  For further reference, below is the chart of GDP through the Third Estimate of 3rd Quarter GDP:

GDP Growth through Q3 2015

source: Doug Short’s post of December 22, 2015, “Q3 GDP Third Estimate at 2.0% Little Changed from the Second Estimate.”

As seen before and during the Financial Crisis, it should be noted that how economic weakness propagates in the current economic paradigm is complex and, to almost all involved, unpredictable in both timing and extent.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1880.33 as this post is written