Saturday, January 16, 2016

Weekly Indicators for January 11 - 15 at

 - by New Deal democrat

My Weekly Indicator post is up at .

The monthly data reported yesterday, which so jarred the market, was apparent in the weekly data as the deterioration in coincident indicators intensified throughout the 4th quarter.  So what is it doing now?

Friday, January 15, 2016

I interrupt this Doomgasm

  - bby New Deal democrat

To put a little perspective on today's economic news, remember that 3 of the 4 reports primarily reflect what is happening with producers, not consumers.  It has been increasingly obvious for 3 months in the weekly data on shipping, steel production, and rail transport that this sector of the economy has gotten significantly worse.

Yet the same weekly data has shown consumers holding up.  Consumers represent about 70% of the economy. Nominal retail sales were down -0.1% in December.  The consensus for CPI is also -0.1%, meaning that real retail sales are likely to be flat for the month.

And how bad is that?  Here is the last year of real retail sales (blue) and real PCE's (red):

We have had much worse readings, including December 2014.

Now here are the same two measures going into the 2001 recession:

and the 2008 recession:

Even with today's negative number, the comparison isn't nearly so bad.

So today's numbers don't fundamentally change the dynamic.  The industrial economy is awful.  The consumer economy -- 70% of the total -- is meh, but positive.

Sent from my iPad

A "quadfecta" of important economic news

 - by New Deal democrat

Today sees 4 important data releases: retail sales, producer prices, industrial production, and total business sales and inventory.

Retail sales, as expected after the punk December auto sales, were negative.  Aside from gas, clothing sales also declined (thank you global warming!).  Unless the CPI is negative (which is possible), this means a real retail sales decline from November's post-recession high.

Anything that suggests that the services sector is turning is soft is very unwelcome, but it is still only one month.

Producer prices, on the other hand, were a slight positive in my reading.  That's because deflationary busts end when YoY deflation bottoms - and we have 100 years of producer commodity prices in support of that argument, as I pointed out yesterday.

While producer prices did decline, they didn't decline nearly as much as they did 12 months ago, so here is what the YoY% change in producer prices look like:

We haven't broken out of the 2015 YoY range of declines, although relatively speaking this was the "least worst" reading in 6 months. perhaps slight evidence that the global slowdown might be in the process of bottoming.

Industrial production of course was also bad, but was most noteworthy is that manufacturing declined slightly, and November's advance in manufacturing was also revised away, meaning the peak in manufacturing was in October.  Here's the graph of overall industrial production (blue) compared with manufacturing (red):

My template is the 2001 business led recession.  Industrial production as a whole is now down nearly as much as it was at the outset of that recession.  The silver lining is that it is almost all utilities and mining (oil!).  This is not so much of a broad based downturn so much as a general stall and a horrendous downturn in specific sectors.

Finally, we got a very limited piece of "good news" (in the sense of having an infected tooth pulled) is that while sales declined,  business inventories declined even more in November, and October was also revised to a negative number: 

This may push Q4 GDP all the way to a negative number.  But we need excess inventories to be liquidated, and that is only going to happen if inventories go down.  So this is telling us that we are beginning to actually work through the problem.

Yesterday in my forecast for the first half of 2016 I wrote that the slowdown is probably going to bottom out by spring.  But today's releases mean the *now*-cast is that the economy at the end of 2015 was a hairbreadth away from recession.

Thursday, January 14, 2016

My forecast for 1H 2016

 - by New Deal democrat

This is up at .

As usual, I am not being a trend-follower.  Rather I am trying to anticipate where the trend will be (to paraphrase hockey great Wayne Gretzky)

Wednesday, January 13, 2016

JOLTS, Labor Market Conditions update

 - by New Deal demorat

In the last few days, the Labor Market Conditions Index and JOLTs data have given us a more detailed look at the jobs market.

The Labor Market Conditions Index is a good leading indicator for the YoY growth in jobs.  It has been positive, but abysmally so, for most of the last year.  The November data, just released, is the best of this poor lot:

This suggests to me to expect a marked slowdown in job growth in upcoming months -- at very least not so good as early 2015.  But it also is not negative, and so not consistent with imminent recession.

The JOLTS is a study in sharp contrasts.  First, here is a comparison of job openings (blue) and hires (red).  We only have one compete past business cycle to compare this with, so lots of caution is required, but in that cycle, hires peaked first and then openings turned down in the months just prior to the onset of the Great Recession:

Which is what we are seeing now.

On the other hand, quits made a new post-recession record:

This does not suggest anything imminent.  Note, I am discounting the 2001 spike at the far left, since we have no idea whether the data before that spike would have been higher or lower.

Overall, this still looks like a late cycle slowdown, but not an actual contraction.

Tuesday, January 12, 2016

South Carolina's best attribute

 - by New Deal democrat

Really, really, REALLY cheap gas:

Shame about their school systems and infrastructure though.

Traveling man

 - by New Deal democrat

Yesterday and today are traveling days. To tide you over, here is your quick summary:

1. The Oil patch, and that portion of the industrial economy that is globally exposed, really really stink.  They are in recession and it has deepened.

2.  The services economy is doing OK.

Here's a 5 year graph of the US$.  Compare the last year with the last six months of 2014:

Despite the stock market breakdown, and the further decline in commodities, the US$ - responsible for all that badness in #1 above -  has not broken out of its 2015 range (yet!).

That is all for now.