Tuesday, January 27, 2015

Durable Goods New Orders – Long-Term Charts Through December 2014

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.
For reference, below are charts depicting this measure.
First, from the St. Louis Fed site (FRED), a chart through December, updated on January 27, 2015.  This value is 230,525 ($ Millions) :
(click on charts to enlarge images)
Durable Goods New Orders December 2014
Here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis:
durable goods new orders 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 January 27, 2015;
_________
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 2034.40 as this post is written

U.S. Deflation - January 27, 2015 Update

This post provides an update to various past posts discussing deflation and "deflationary pressures."  I have extensively written of “deflationary pressures” and deflation as I continue to believe that 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.]
As one can see in the various professional economic forecasts mentioned in this site – as well as the continually negligible readings from the Federal Reserve Bank of Atlanta’s series titled “Deflation Probabilities” – economic forecasters continue to  have virtually no expectation of U.S. deflation either in the near-term or for the next few years.  However, at the same time, as the Wall Street Journal mentioned in a January 16 article, "The Fed has fallen short of its inflation goal for 2 1/2 years..."
I continue to believe that deflationary conditions will have serious direct and indirect adverse consequences, and would both accompany and cause severe economic hardship.  As I wrote in the July 11, 2013 post titled "Would Deflation Be Beneficial?":
Also of note is various pernicious dynamics that would likely accompany deflation.  While these, of course, would vary with the extent of deflation, many would be inimical to today’s U.S. economic and financial structure.
These dynamics are numerous and many are complex, and as such aren't suitably discussed in a brief manner.  (For those interested, the Bloomberg article of January 21, 2015, titled "Why Falling Prices Are Actually a Really Bad Thing" does discuss various problems that arise with deflation, although I am not necessarily in total agreement with various aspects of the article, including its points and scope.)
For reference purposes, below are three charts showing the CPI, commodities, and inflation expectations:
Here is a chart of the CPI as seen in Doug Short’s update of January 16, 2015 titled “December Headline Consumer Price Index At Its Lowest Since October 2009” :
CPI headline and core
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Here is a chart of the GSCI Commodity Index, shown on a weekly basis since 2003 on a LOG scale:
(chart courtesy of StockCharts.com; chart creation and annotation by the author)
GSCI Weekly
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Here is a chart of the 10-Year Breakeven Inflation Rate, with a last value of 1.61% as of the January 23, 2015 update (for those unaware of this measure, an excerpt from the FRED description: "The latest value implies what market participants expect inflation to be in the next 10 years, on average.")
10-year inflation breakeven
Source:  Federal Reserve Bank of St. Louis, 10-Year Breakeven Inflation Rate [T10YIE], retrieved from FRED, Federal Reserve Bank of St. Louis:
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2057.09 as this post is written

Monday, January 26, 2015

Median Household Income Chart

I have written many blog posts concerning the worrisome trends in income and earnings.
Doug Short, in his January 26, 2015 post titled “Real Median Household Income Rose a Significant 1.0% in December” produced the chart below.  It is based upon data from Sentier Research, and it shows both nominal and real median household incomes since 2000, as depicted.  As one can see, post-recession real median household income (seen in the blue line since 2009) is especially worrisome.
(click on chart to enlarge image)
median household income
As Doug mentions in his aforementioned blog post:
As the excellent data from Sentier Research makes clear, the mainstream U.S. household was struggling before the Great Recession. At this point, real household incomes are in worse shape than they were four years ago when the recession ended.
Among other items seen in his blog post is a chart depicting each of the two (nominal and real household incomes) data series’ percent change over time since 2000.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2057.09 as this post is written

Friday, January 23, 2015

Updates Of Economic Indicators January 2015

Here is an update of various indicators that are supposed to predict and/or depict economic activity. These indicators have been discussed in previous blog posts:
The January 2015 Chicago Fed National Activity Index (CFNAI) updated as of January 23, 2015:
cfnai-monthly-ma3 1-23-15
As of January 23, 2015 (incorporating data through January 16, 2015) the WLI was at 130.5 and the WLI, Gr. was at -5.0%.
A chart of the WLI,Gr., from Doug Short’s post of January 23, 2015, titled “ECRI Recession Watch:  Update“:
ECRI WLI,Gr.
Here is the latest chart, depicting the ADS Index from December 31, 2007 through January 17, 2015:
ads index
As per the January 23, 2015 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased Again,” the LEI was at 121.1 and the CEI was at 111.4 in December.
An excerpt from the January 23 release:
“December’s gain in the LEI was driven by a majority of its components, suggesting the short-term outlook is getting brighter and the economy continues to build momentum,” said Ataman Ozyildirim, Economist at The Conference Board. “Still, a lack of growth in residential construction and average weekly hours in manufacturing remains a concern. Current economic conditions measured by the coincident indicators show employment and income gains are helping to keep the U.S. economy on a solid expansionary path despite some weakness in industrial production.”
Here is a chart of the LEI from Doug Short’s blog post of January 23 titled “Conference Board Leading Economic Index Increased Again in November“ :
Conference Board LEI
 
_________
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 2062.85 as this post is written

Money Supply Charts Through December 2014

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 January 16, 2015 depicting data through December 2014, with value $12,919.9 Billion:
MZM chart
Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis:
MZM chart YoY
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 23, 2015:
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 January 22, 2015, depicting data through December 2014, with value $11,625.4 Billion:
M2SL December 2014
Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis:
M2 seasonally adjusted percent change from year ago
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 23, 2015:
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2063.15 as this post is written

The U.S. Economic Situation – January 23, 2015 Update

Perhaps the main reason that I write of our economic situation is that I continue to believe, based upon various analyses, that our economic situation is in many ways misunderstood.  While no one likes to contemplate a future rife with economic adversity, current and future economic problems must be properly recognized and rectified if high-quality, sustainable long-term economic vitality is to be realized.
There are an array of indications and other “warning signs” – many readily apparent – that current economic activity and financial market performance is accompanied by exceedingly perilous dynamics.
I have written extensively about this peril, including in the following:
Building Financial Danger” (ongoing updates)
My analyses continues to indicate that the growing level of financial danger will lead to the next stock market crash that will also involve (as seen in 2008) various other markets as well.  Key attributes of this next crash is its outsized magnitude (when viewed from an ultra-long term historical perspective) and the resulting economic impact.  This next financial crash is of tremendous concern, as my analyses indicate it will lead to a Super Depression – i.e. an economy characterized by deeply embedded, highly complex, and difficult-to-solve problems.
For long-term reference purposes, here is a chart of the Dow Jones Industrial Average since 1900, depicted on a monthly basis using a LOG scale (updated through January 16, 2015, with a last value of 17511.57):
(click on chart to enlarge image)(chart courtesy of StockCharts.com)
DJIA since year 1900
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2063.15 as this post is written

Thursday, January 22, 2015

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI) is one index that is supposed to measure stress in the financial system.  Its reading as of the January 22, 2015 update (reflecting data through January 16) is -.807.
Of course, there are a variety of other measures and indices that are supposed to measure financial stress and other related issues, both from the Federal Reserve as well as from private sources.
Two other indices that I regularly monitor include the Chicago Fed National Financial Conditions Index (NFCI) as well as the Chicago Fed Adjusted National Financial Conditions Index (ANFCI).
Here are summary descriptions of each, as seen in FRED:
The National Financial Conditions Index (NFCI) measures risk, liquidity and leverage in money markets and debt and equity markets as well as in the traditional and “shadow” banking systems. Positive values of the NFCI indicate financial conditions that are tighter than average, while negative values indicate financial conditions that are looser than average.
The adjusted NFCI (ANFCI). This index isolates a component of financial conditions uncorrelated with economic conditions to provide an update on how financial conditions compare with current economic conditions.
For further information, please visit the Federal Reserve Bank of Chicago’s web site:
Below are the most recently updated charts of the NFCI and ANFCI, respectively.
The NFCI chart below was last updated on January 22, 2015 incorporating data from January 5,1973 to January 16, 2015, on a weekly basis.  The January 16, 2015 value is -.65:
(click on chart to enlarge image)
NFCI 1-22-15
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 22, 2015:
The ANFCI chart below was last updated on January 22, 2015 incorporating data from January 5,1973 to January 16, 2015, on a weekly basis.  The January 16 value is .02:
ANFCI 1-22-15
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 22, 2015:
_________
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 2049.19 as this post is written

Wednesday, January 21, 2015

The State of the Union Address – Notable Excerpts

I found President Obama’s State of the Union Address last night (January 20, 2015) to contain some noteworthy comments.  While I could comment extensively on many parts of the speech, for now I will indicate excerpts that I found most relevant with regard to the economic situation, and may comment upon them at a future point.  I am highlighting these excerpts for many reasons; it should be noted that I do not necessarily agree with any or all of them.
Here are the excerpts I found most relevant, in the order they occurred in the speech:
Tonight, after a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999.  Our unemployment rate is now lower than it was before the financial crisis.  More of our kids are graduating than ever before; more of our people are insured than ever before; we are as free from the grip of foreign oil as we’ve been in almost 30 years.
also:
The shadow of crisis has passed, and the State of the Union is strong.
At this moment – with a growing economy, shrinking deficits, bustling industry, and booming energy production – we have risen from recession freer to write our own future than any other nation on Earth.  It’s now up to us to choose who we want to be over the next fifteen years, and for decades to come.
Will we accept an economy where only a few of us do spectacularly well?  Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?
also:
America, Rebekah and Ben’s story is our story.  They represent the millions who have worked hard, and scrimped, and sacrificed, and retooled.  You are the reason I ran for this office.  You’re the people I was thinking of six years ago today, in the darkest months of the crisis, when I stood on the steps of this Capitol and promised we would rebuild our economy on a new foundation.  And it’s been your effort and resilience that has made it possible for our country to emerge stronger.
We believed we could reverse the tide of outsourcing, and draw new jobs to our shores.  And over the past five years, our businesses have created more than 11 million new jobs.
also:
We believed that sensible regulations could prevent another crisis, shield families from ruin, and encourage fair competition.  Today, we have new tools to stop taxpayer-funded bailouts, and a new consumer watchdog to protect us from predatory lending and abusive credit card practices.  And in the past year alone, about ten million uninsured Americans finally gained the security of health coverage.
At every step, we were told our goals were misguided or too ambitious; that we would crush jobs and explode deficits.  Instead, we’ve seen the fastest economic growth in over a decade, our deficits cut by two-thirds, a stock market that has doubled, and health care inflation at its lowest rate in fifty years.
So the verdict is clear.  Middle-class economics works.  Expanding opportunity works.  And these policies will continue to work, as long as politics don’t get in the way.  We can’t slow down businesses or put our economy at risk with government shutdowns or fiscal showdowns.  We can’t put the security of families at risk by taking away their health insurance, or unraveling the new rules on Wall Street, or refighting past battles on immigration when we’ve got a system to fix.  And if a bill comes to my desk that tries to do any of these things, it will earn my veto.
Today, thanks to a growing economy, the recovery is touching more and more lives.  Wages are finally starting to rise again.  We know that more small business owners plan to raise their employees’ pay than at any time since 2007.  But here’s the thing – those of us here tonight, we need to set our sights higher than just making sure government doesn’t halt the progress we’re making.  We need to do more than just do no harm.  Tonight, together, let’s do more to restore the link between hard work and growing opportunity for every American.
also:
In fact, at every moment of economic change throughout our history, this country has taken bold action to adapt to new circumstances, and to make sure everyone gets a fair shot.  We set up worker protections, Social Security, Medicare, and Medicaid to protect ourselves from the harshest adversity.  We gave our citizens schools and colleges, infrastructure and the internet – tools they needed to go as far as their effort will take them.
also:
Of course, nothing helps families make ends meet like higher wages.  That’s why this Congress still needs to pass a law that makes sure a woman is paid the same as a man for doing the same work.  Really.  It’s 2015.  It’s time.  We still need to make sure employees get the overtime they’ve earned.  And to everyone in this Congress who still refuses to raise the minimum wage, I say this:  If you truly believe you could work full-time and support a family on less than $15,000 a year, go try it.  If not, vote to give millions of the hardest-working people in America a raise.
These ideas won’t make everybody rich, or relieve every hardship.  That’s not the job of government.  To give working families a fair shot, we’ll still need more employers to see beyond next quarter’s earnings and recognize that investing in their workforce is in their company’s long-term interest.  We still need laws that strengthen rather than weaken unions, and give American workers a voice.  But things like child care and sick leave and equal pay; things like lower mortgage premiums and a higher minimum wage – these ideas will make a meaningful difference in the lives of millions of families.  That is a fact.  And that’s what all of us – Republicans and Democrats alike – were sent here to do.
Second, to make sure folks keep earning higher wages down the road, we have to do more to help Americans upgrade their skills.
America thrived in the 20th century because we made high school free, sent a generation of GIs to college, and trained the best workforce in the world.  But in a 21st century economy that rewards knowledge like never before, we need to do more.
By the end of this decade, two in three job openings will require some higher education.  Two in three.  And yet, we still live in a country where too many bright, striving Americans are priced out of the education they need.  It’s not fair to them, and it’s not smart for our future.
That’s why I am sending this Congress a bold new plan to lower the cost of community college – to zero.
also:
Since 2010, America has put more people back to work than Europe, Japan, and all advanced economies combined.  Our manufacturers have added almost 800,000 new jobs.  Some of our bedrock sectors, like our auto industry, are booming.  But there are also millions of Americans who work in jobs that didn’t even exist ten or twenty years ago – jobs at companies like Google, and eBay, and Tesla.
So no one knows for certain which industries will generate the jobs of the future.  But we do know we want them here in America.  That’s why the third part of middle-class economics is about building the most competitive economy anywhere, the place where businesses want to locate and hire.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 2034.50 as this post is written