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ECRI Recession Watch: Growth Index Virtually Unchanged
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -10.0 in its latest reading, data through October 21, a fractionally change from the previous week's -10.1. On September 30th, the ECRI publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st.
WSJ Economists' Q3 GDP Forecasts: 2.1 in Q3 and 2.0 in Q4
One of the big economic announcements in the week ahead will be the Advance Estimate for Q3 GDP. The final number for Q2 GDP was 1.3%. Economists in general are optimistic that Q3 will show an improvement in this broad measure of the economy. The consensus for Q3 is 2.2%. But what sort of distribution of opinions do we find among the economists? Is the range of opinions wide or narrow? Let's review the data in the Wall Street Journal's October survey of economists. Fifty of the 56 economists solicited for survey responded.
Libya, Ghaddafi and the Arab Spring
While the US and Europe have remained fixated on the simmering sovereign debt crisis in Euroland, the Arab world has been experiencing waves of demonstrations, protests and civil wars that have seen the fall of three major regimes thus far in 2011, with several others struggling to find equilibrium. The underlying forces behind the Arab Spring are complex and vary from country to country. But a key factor is demographics, as a glance at the population pyramids below suggests.
Understanding Federal Debt: Point - Counter Point
Once the debt required to create $1 of GDP growth exceeded $1, the rate of economic growth in the U.S. has been on a steady decline. Unfortunately, while debt was accumulated and savings depleted in order to sustain an extraordinary lifestyle for the last three decades, the ability to create productive investment has been depleted. The fiscal and monetary policies implemented by the last five administrations have left the country in a far weaker state, as each President continued the failed policies from the one before. Now we must deal with the issues.
ECRI Recession Watch: Growth Index Drops Further
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has now posted 11 consecutive declines since early August. The interim high of 8.0 was set in the week ending on April 15. The latest reading, data through October 14, is -10.1, down from the previous week's -9.7. For a close look at this movement of this index in recent months, here's a snapshot of the data since 2000.
''Savings Lost'': The True Cost of Zero Interest Rate Policy
Savers beware. Bank bailouts and an"easy money" Federal Reserve policy cause financial injury to nearly everyones bottom line in at least three distinct ways. First, we taxpayers funded the "bailouts" through higher taxes. Second, your bank pays minimal interest to your savings accounts. Third, the increased dollar printing causes commodities to rise, which increases gas and food prices. Each injury requires a little more explanation than a simple statement. The first injury is easy-the "bailouts" took bad stuff from the balance sheets of banks and placed them in our hands.
ECRI Recession Watch: Growth Index Declines Further
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has posted 10 consecutive declines since early August. The interim high of 8.0 was set in the week ending on April 15. The latest reading, data through October 7, is -9.6, down from the previous week's -8.7. On September 30th, the ECRI publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st.
Boomer Demographics: The Shift Ahead
I looked at developments in U.S. demographics from 1980 to the present with a focus on the Boomer bulge. Then I examined current day demographics for several major countries around the globe. I've developed a set of population pyramids for the U.S. that start with 1981 and span7 decades at 10-year intervals using the U.S. Census Bureau data. Let's look at some comparative numbers for these seven snapshots. I've calculated the Elderly Dependency Ratios for each. As this ratio shifts higher, the productive population is increasingly burdened by the cost of entitlement programs.
ECRI Recession Watch: Growth Index Declines Further
Last week, September 30th, the Economic Cycle Research Institute (ECRI) publicly announced that the U.S. is tipping into a recession, a call the Institute had announced to its private clients on September 21st. One week later, the Weekly Leading Index (WLI) growth indicator of the ECRI has posted another week-over-week decline, now at -8.1 from the previous week's -7.2 (latest publicly available data as of September 30). The interim high of 8.1 was set in the week ending on April 15.
Is the Stock Market Cheap?
Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for September 2011, which is 1173.88. The ratios in parentheses use the monthly close of 1131.42. For the latest earnings, see the table below created from Standard & Poor's latest earnings spreadsheet. ? TTM P/E ratio = 13.3 (12.9) ? P/E10 ratio = 19.7 (19.0)
ECRI Makes a Recession Call
Today the ECRI publicly announced that the U.S. is tipping into a recession. Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there's nothing that policy makers can do to head it off. ECRI's recession call isn't based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down before the Arab Spring and Japanese earthquake to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes.
ECRI Growth Metric: Revised Data, Still Declining
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted another week-over-week decline, now at -6.7 from last week's -6.1, which is an upward revision from -7.1. In fact, with today's release, the publicly available ECRI data has been revised as far back as January 14th, with increasingly significant revisions from Q2 forward. The formula for the ECRI indicators is not published, but my speculation, based on the timing of the revisions, is that the Q2 Fed Flow of Funds release on September 13th occasioned the updates.
ECRI Growth Metric Goes Yet Further Negative
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has now dropped further into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update of the publicly available data available (through September 9) now puts the decline at -7.1, down from last week's revised -6.6 (previously -6.2). The interim high of 8.0 was set in the week ending on April 15. For a close look at this movement of this index in recent months, here's a snapshot of the data since 2000.
WSJ Economists' GDP Forecasts: 2.0 in Q3 But Slow Improvement Thereafter
Yesterday the WSJ released the results of their September survey of 56 economists, mostly from major financial firms with a handful from academic institutions. The September survey is available in Excel format here. I spent some time studying the results and have made a little snapshot to help us understand what these mainstream professional economists are forecasting for quarterly GDP for the next six quarters through the end of 2012. The chart below includes the responses of each economist. The six forecast series are arranged horizontally from low to high.
The Great American Economic Lie
The idea that the economy has grown at roughly 5% since 1980 is a lie. In reality the economic growth of the U.S. has been declining rapidly over the past 30 years supported only by a massive push into deficit spending. From 1950-1980 the economy grew at an annualized rate of 7.7%. This was accomplished with a total credit market debt to GDP ratio of less than 150%. The CRITICAL factor to note is that economic growth was trending higher during this span, going from roughly 5% to a peak of nearly 15%. The end game of three decades of excess is upon us.
Retail Sales: The "Real" Consumer And Their Recession-Level Spending
The Retail Sales Report released this morning shows that retail sales in August were flat. The first chart shows the complete series from 1992, when the U.S. Census Bureau began tracking the data. I've highlighted recessions and the approximate range of two major economic episodes. The Tech Crash that began in the spring of 2000 had relatively little impact on consumption. The Financial Crisis of 2008 has had a major impact. After the cliff-dive of the Great Recession, the recovery in retail sales has taken us (in nominal terms) 2.9% above November 2007 pre-recession peak.
U.S. Household Incomes: A 43-Year Perspective
The Census Bureau has released the household income data for 2010. It is posted on their website. What I'm featuring in this update is an analysis of the quintile breakdown of data from 1967 through 2010. Most people think in nominal terms, so the first chart below illustrates the current dollar values across the 43-year period (in other words, the value of a dollar at the time receivednot adjusted for inflation). The charts below show income growth over the complete data series. In addition to the quintiles, the Census Bureau includes the mean income for the top five percent of households.
ECRI Growth Metric Drops Yet Deeper into Negative Territory
The Weekly Leading Index growth indicator of the Economic Cycle Research Institute has now dropped further into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update of the publicly available data available (through September 2) now puts the decline at -6.2, down from last week's revised -4.4. The interim high of 8.0 was set in the week ending on April 15. See the CNBC video clip featuring Lakshman Achuthan, Co-Founder and Chief Operations Officer of ECRI, discussing the risk of a new recession.
The Great Shift From Manufacturing to Services
In honor of Labor Day, which was signed into law as a national holiday in 1894, I spent some time this morning studying a topic I've occasionally mentioned: The shift in the United States from a manufacturing to a services economy. The Department of Labor's Bureau of Labor Statistics has monthly data on employment by industry categories reaching back to 1939. The first chart below is an overlay of the compete series of employment numbers for the two major categories, manufacturing and services. When I say major, I'm referring to the domination of the labor market by these two industries.
Is the Stock Market Cheap?
Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for August 2011, which is 1185.31. The ratios in parentheses use the monthly close of 1218.89. For the latest earnings, see the table below created from Standard & Poor's latest earnings spreadsheet.
ECRI Growth Metric Drops Deeper into Negative Territory
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) dropped deeper into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update, data through August 26, now puts the decline at -4.3, down from last week's revised -2.1. The interim high of 8.0 was set in the week ending on April 15. See the CNBC video clip featuring Lakshman Achuthan, Co-Founder and Chief Operations Officer of ECRI, which aired on Wednesday, August 31st, just before the ADP jobs report.
Recession? No. We're in the Second Great Contraction
Here are some charts of troughs to peaks that show why so many people believe the U.S. is still mired in a recession. For those of us who do accept the NBER recession call, the charts support the characterization of our economic condition as The Second Great Contraction. Since the beginning of quarterly GDP data, which has been tracked since 1947, the U.S. has never had an official recession without having achieved new highs in Real GDP and nonfarm employment. Let's hope that continues. But ultimately the debate over recession boundaries is a minor quibble in the ongoing economic reality.
The ECRI Weekly Leading Index: Growth Metric Slips Further into Negative Territory
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) dropped further into negative territory after oscillating in a narrow range (1.5 to 2.1) from late June through the first week of August. Today's update, data through August 19, now puts the decline at -2.9, down from last week's -0.1. The interim high of 8.0 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.
Boomers Are Going To Be A Real Drag
Many may scoff at the Fed's report that stock prices will not recover to their 2010 highs until 2027. The migration of "baby boomers" into retirement, combined with sustained high unemployment, low savings rates and a weak economy, does not bode well for strong financial markets into the future. While there are hopes that the economy will recover in spite of the abundance of factors building against it, the reality is that we may be dealing with the "Japanese Experience".
The ECRI Weekly Leading Index: Growth Metric Goes (Fractionally) Negative
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has been oscillating in a narrow range (1.5 to 2.0 in the latest revision) for the past several weeks. However today's update, data through August 12, has touched negative territory with a -0.1 reading. The interim high of 8.0 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.
A Long-Term Look at Inflation
The August 2011 Consumer Price Index for Urban Consumers (CPI-U) released today puts the July year-over-year inflation rate at 3.63%, which is fractionally below the 3.96% average since the end of World War II. For a comparison of headline inflation with core inflation, which is based on the CPI excluding food and energy, see this new feature. For better understanding of how CPI is measured and how it impacts your household, see my Inside Look at CPI components. For an even closer look at how the components are behaving, see this X-Ray View of the data for the past five months.
Can You Trust Retirement Calculators?
It's time for the truth about calculating how much money you need for retirement. Finding the answer isn't as simple as it appears on the surface. Sure, retirement calculators are easy to use. Just input a few assumptions about the future and your computer instantly provides the magic number. It's only when you dig deeper that you find the problems. Input the wrong values for the impossible-to-make assumptions and your number will be dangerously wrong, jeopardizing your retirement security.
The "Real" Mega-Bears
I'm posting my usual update shortly after reading an interesting, if rather disturbing, WSJ article, This Time, Maybe the U.S. Is Japan. It's time again for the weekend update of our "Real" Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high. The chart below is consistent with my preference for real (inflation-adjusted) analysis of long-term market behavior.
ThECRI Weekly Leading Index: Consistently Indicating Slow Growth
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) has been oscillating in a narrow range (from 1.6 to 2.1) for the past seven weeks, with the latest reading at 1.7. The interim high of 8.0 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.
Will the "Real" GDP Please Stand Up?
How do you get from Nominal GDP to Real GDP? You subtract inflation. The Bureau of Economic Analysis uses its own GDP Deflator for this purpose, which is somewhat different from the BEA's deflator for Personal Consumption Expenditures and quite a bit different from the better-known Bureau of Labor Statistic's inflation gauge, the Consumer Price Index. Now that we have the preliminary read on Q2 GDP and some rather stunning revisions for the past three years, I've updated my trio of charts showing quarterly Real GDP since 1960 with the official and two variant adjustment techniques.
Converging On The Horizon
By the end of this year, the earnings cycle is likely to be well above its typical thresholds of duration and magnitude. Although earnings could again rise in 2012, the magnitude of excess margins portends a fairly significant decline when the earnings cycle reverts. In addition, the profile of cyclical cycles in the stock market may have also run its course. The market may sustain or extend its gains for 2011 by year-end, but another up-year in 2012 would make history. Not only is duration stretched, but also the magnitude of cumulative gains has now matched the historical average.
Crestmont Market Valuation Update
The recent article P/E: Future On The Horizon by Advisor Perspectives contributor Ed Easterling provided an overview of Ed's method for determining where the market is headed. His analysis is quite compelling. Accordingly I have added the Crestmont data to my monthly market valuation updates. The first chart is the Crestmont equivalent of the Cyclical P/E10 ratio chart I've been sharing on a monthly basis for the past few years.
The ECRI Weekly Leading Index: Stabilization Continues
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) rose to 2.0 from a downward revision of 1.6 for last week (originally 1.7). The economy seems to be stabilizing after eleven consecutive weeks of decline. The interim high, now adjusted upward to 8.0, was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.
WSJ Economists' GDP Forecasts: Weak Q2 But a Stronger 2nd Half
Every month the Wall Street Journal surveys a few dozen economists to get their opinions on a variety of hot topics. The survey also asks for forecasts on a regular set of economic indicators: 10-Year Yields, Fed Funds Rate, GDP, CPI, Unemployment Rate, Housing Starts, Crude oil, Payrolls, Home Prices. I've made a little snapshot to help us understand what these mainstream professional eoconomists are forecasting for quarterly GDP for the rest of the year. The markers are arranged from low to high for each quarter so we get a clear idea of the distribution of responses.
Are We Headed For A Second Recession?
Is a second recession in so short of a time in the offing? It certainly seems that way. The hope for a continued recovery has grown dim lately as many of the economic indexes are moving towards contractionary territory. In the words of David Rosenberg, chief economist at Gluskin Sheff, "one small shock" could send us into a second recession. With the recent release of the Chicago Fed National Activity Index, our proprietary economic index is just one small step away from crossing the 35 mark which has always been a pre-cursor to recession.
The ECRI Weekly Leading Index: Stabilizing at Slow Growth
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) remained steady at 1.7 the same level as the two previous weeks. The economy seems to be stabilizing after eleven consecutive weeks of decline. The interim high, now adjusted upward to 8.0, was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.
The Shape of Market Bubbles (with a Footnote on Gold)
In my weekly updates of major worlds markets, one of the charts includes an overlay of the amazing bubble in the Shanghai Composite Index. In this commentary we'll build an overlay of four major bubbles across market history to see the variety of shapes a bubble can take. But first let's take a long view of the index.
Tax Reform: The Overlooked Solution
The "wealthy", defined by the current administration as those making more than $250,000 a year, also comprise the largest percentage of small business owners - the group that creates the majority of jobs. When you look at the data, they are already paying more than their "fair share". The top 10% of wage earners pay more than 70% of all of the taxes while the top 25% covers almost 90%. Here is my "radically moderate" view point: Tapping the people who already pay 90% of the tax bill will not create more revenue. On the contrary, it will cause further economic weakness.
WSJ Economists's Forecasts for the 10-Year Note
Every month the Wall Street Journal surveys a few dozen economists to get their opinions on a variety of hot topics. The survey also asks for forecasts on a regular set of economic indicators: 10-Year Yields, Fed Funds Rate, GDP, CPI, Unemployment Rate, Housing Starts, Crude oil, Payrolls, Home Prices. Now that the July forecast is available, I spent a few minutes this morning reviewing the 2011 and 2012 year-end forecasts for 10-year yields. The chart below illustrates the responses of the 55 economists solicited in the July survey.
Inflation: A Five-Month X-Ray View
Here is a table showing the annualized change over the past five months for Headline and Core CPI. I've also included each of the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation. We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components.
The ECRI Weekly Leading Index: Slow Growth Stabilizing?
The Weekly Leading Index (WLI) The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) remained steady at 1.7 ? the same as last week's 1.7, which was a downward revision from 1.9. Is the economy beginning to stabilize after eleven consecutive weeks of decline? The interim high of 7.8 was set in the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.
The ECRI Weekly Leading Index: Eleven Consecutive Weeks of Slowing Growth
The Weekly Leading Index (WLI) Growth indicator of the Economic Cycle Research Institute (ECRI) declined to 1.8 from last week's 1.9, a downward revision from 2.0. This is the eleventh consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.
Results 251–292
of 292 found.
