Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – October 19, 2018 Update

As I stated in my July 12, 2010 post (“ECRI WLI Growth History“):

For a variety of reasons, I am not as enamored with ECRI’s WLI and WLI Growth measures as many are.

However, I do think the measures are important and deserve close monitoring and scrutiny.

Below are three long-term charts, from the Doug Short site’s ECRI update post of October 19, 2018 titled “ECRI Weekly Leading Index Update.”  These charts are on a weekly basis through the October 19, 2018 release, indicating data through October 12, 2018.

Here is the ECRI WLI (defined at ECRI’s glossary):

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This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:

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This last chart depicts, on a long-term basis, the WLI, Gr.:

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I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site 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 2765.41 as this post is written

Trends Of S&P500 Earnings Forecasts

S&P500 earnings trends and estimates are a notably important topic, for a variety of reasons, at this point in time.

FactSet publishes a report titled “Earnings Insight” that contains a variety of information including the trends and expectations of S&P500 earnings.

For reference purposes, here are two charts as seen in the “Earnings Insight” (pdf) report of October 12, 2018:

from page 24:

(click on charts to enlarge images)

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from page 25:

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2768.78 as this post is written

S&P500 EPS Forecasts For Years Of 2018, 2019, And 2020

As many are aware, Thomson Reuters publishes earnings estimates for the S&P500.  (My other posts concerning S&P earnings estimates can be found under the S&P500 Earnings tag)

The following estimates are from Exhibit 24 of the “S&P500 Earnings Scorecard” (pdf) of October 18, 2018, and represent an aggregation of individual S&P500 component “bottom up” analyst forecasts.  For reference, the Year 2014 value is $118.78/share, the Year 2015 value is $117.46, the Year 2016 value is $118.10/share, and the Year 2017 value is $132.00/share:

Year 2018 estimate:

$161.79/share

Year 2019 estimate:

$178.41/share

Year 2020 estimate:

$195.41/share

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2768.78 as this post is written

Standard & Poor’s S&P500 EPS Estimates 2018 2019 – October 12, 2018

As many are aware, Standard & Poor’s publishes earnings estimates for the S&P500.  (My posts concerning their estimates can be found under the S&P500 Earnings label)

For reference purposes, the most current estimates are reflected below, and are as October 12, 2018:

Year 2018 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $157.22/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $143.40/share

Year 2019 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $176.31/share

-From a “top down” perspective, operating earnings of N/A

-From a “bottom up” perspective, “as reported” earnings of $164.31/share

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2792.44 as this post is written

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 October 11, 2018 update (reflecting data through October 5, 2018) is -1.263.

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:

http://www.chicagofed.org/webpages/publications/nfci/index.cfm

Below are the most recently updated charts of the NFCI and ANFCI, respectively.

The NFCI chart below was last updated on October 17, 2018 incorporating data from January 8, 1971 through October 12, 2018, on a weekly basis.  The October 12 value is -.88:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 17, 2018:

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

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The ANFCI chart below was last updated on October 17, 2018 incorporating data from January 8,1971 through October 12, 2018, on a weekly basis.  The October 12 value is -.76:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 17, 2018:

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

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site 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 2813.70 as this post is written

Disturbing Charts (Update 32)

I find the following charts to be disturbing.   These charts would be disturbing at any point in the economic cycle; that they (on average) depict such a tenuous situation now – 112 months after the official (as per the September 20, 2010 NBER BCDC announcement) June 2009 end of the recession – is especially notable.

These charts raise a lot of questions.  As well, they highlight the “atypical” nature of our economic situation from a long-term historical perspective.

All of these charts are from the Federal Reserve, and represent the most recently updated data.

(click on charts to enlarge images)

Housing starts (last updated September 19, 2018):

US. Bureau of the Census, Housing Starts: Total: New Privately Owned Housing Units Started [HOUST], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/HOUST/, October 15, 2018.

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The Federal Deficit (last updated March 27, 2018):

US. Office of Management and Budget, Federal Surplus or Deficit [-] [FYFSD], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYFSD/, October 15, 2018.

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Federal Net Outlays (last updated March 27, 2018):

US. Office of Management and Budget, Federal Net Outlays [FYONET], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/FYONET/, October 15, 2018.

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State & Local Personal Income Tax Receipts (% Change from Year Ago)(last updated July 27, 2018):

US. Bureau of Economic Analysis, State and local government current tax receipts: Personal current taxes: Income taxes [ASLPITAX], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/ASLPITAX/, October 15, 2018.

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Total Loans and Leases of Commercial Banks (% Change from Year Ago)(last updated October 12, 2018):

Board of Governors of the Federal Reserve System (US), Bank Credit of All Commercial Banks [TOTBKCR], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTBKCR/, October 15, 2018.

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Bank Credit – All Commercial Banks (% Change from Year Ago)(last updated October 12, 2018):

Board of Governors of the Federal Reserve System (US), Bank Credit of All Commercial Banks [TOTBKCR], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/TOTBKCR/, October 15, 2018.

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M1 Money Multiplier (last updated October 11, 2018):

Federal Reserve Bank of St. Louis, M1 Money Multiplier [MULT], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/MULT/, October 15, 2018.

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Median Duration of Unemployment (last updated October 5, 2018):

US. Bureau of Labor Statistics, Median Duration of Unemployment [UEMPMED], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/UEMPMED/, October 15, 2018.

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Labor Force Participation Rate (last updated October 5, 2018):

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/, October 15, 2018.

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The Chicago Fed National Activity Index (CFNAI) 3-month moving average (CFNAI-MA3)(last updated September 24, 2018):

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 15, 2018.

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I will continue to update these charts on an intermittent basis as they deserve close monitoring…

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2750.79 as this post is written

Charts Indicating Economic Weakness – October 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.  As seen in the October 2018 Wall Street Journal Economic Forecast Survey the consensus (average estimate) among various economists is for 3.1% GDP growth in 2018 and 2.4% GDP growth in 2019.  However,  as discussed below, 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.

One GDP-based measure that is notable is that of the GDPplus measure from the Federal Reserve Bank of Philadelphia.

Shown below is the most recent update (from September 27, reflecting the GDP release for the 2nd Quarter of 2018, 3rd Estimate).  Of note is the divergence between the Real GDP (4.1%*, shown in orange) and the GDPplus measure (2.0%*, shown in light blue):

* the quarter-over-quarter growth rate in continuously compounded annualized percentage points

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Other Charts Indicating U.S. Economic Weakness

Below are a small sampling of charts that depict weak growth or contraction, and a brief comment for each:

The Aruoba-Diebold-Scotti Business Conditions Index (ADS Index)

While the 2nd quarter GDP (3rd Estimate)(pdf) was 4.2%, there are other broad-based economic indicators that seem to imply a weaker growth rate.

Among the broad-based economic indicators that imply weaker growth is that of the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index.)  Below is a two-year chart of the index through October 6, 2018, with a value of -.0323, as of the October 11 update:

source:  Federal Reserve Bank of Philadelphia, Aruoba-Diebold-Scotti Business Conditions Index (ADS Index)

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Auto Sales

As discussed in previous posts, I believe that many factors indicate that auto sales have peaked.  While this peaking will have extensive economic implications, there are many other factors concerning auto sales that are worrisome.  While an exhaustive discussion of the topic 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 various aspects of pricing and discounting.

Shown below is a 3-year chart showing the performance of various auto stocks.  As one can see, there has been consistent weakness in these stocks (generally) since the beginning of 2018:

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

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Vehicle Miles Traveled

I continue to find the flagging growth trend in the “Vehicle Miles Traveled” (NSA) measure since 2015 to be notable.

“Vehicle Miles Traveled” through August had a last value of 286,654 Million.  Shown below is  the measure displayed on a “Percent Change From Year Ago” basis with value 1.2%, last updated October 12, 2018:

source:   U.S. Federal Highway Administration, Vehicle Miles Traveled [TRFVOLUSM227NFWA], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed October 12, 2018:

https://fred.stlouisfed.org/series/TRFVOLUSM227NFWA

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Underperformance Of Consumer Staples Stocks

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.

One recent development that appears to be an indication of problems in consumer spending is the performance of the consumer staples stocks.  As one can see in the chart below, there has been a marked relative weakness in these stocks (with the XLP serving as a proxy).  The chart shows a 10-year daily depiction of the XLP (top plot), the S&P500 (middle plot) and XLP:S&P500 ratio (bottom plot.)  While there can be various interpretations and reasons for this underperformance, it does appear to represent a “red flag” especially considering other problematical indications concerning consumer spending:

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

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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.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2767.13 as this post is written

The October 2018 Wall Street Journal Economic Forecast Survey

The October 2018 Wall Street Journal Economic Forecast Survey was published on October 11, 2018.  The headline is “WSJ Survey:  Economists Increasingly Confident of Fed Rate Hikes.”

I found numerous items to be notable – although I don’t necessarily agree with them – both within the article and in the “Economist Q&A” section.

An excerpt:

Private economists have continued to raise their projections for interest rates through next year, showing greater agreement with the Federal Reserve’s expectations, according to The Wall Street Journal’s latest survey.

All 57 respondents expected the Fed to raise its benchmark federal-funds rate once more this year. Looking further ahead, 42% forecast three central-bank rate rises in 2019, while 21% project four. In last month’s survey, the shares were 41% and 17%, respectively.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 17.64%. The individual estimates, of those who responded, ranged from 0% to 50%.  For reference, the average response in September’s survey was 17.73%.

As stated in the article, the survey’s respondents were 57 academic, financial and business economists.  Not every economist answered every question.  The survey was conducted October 5 – October 9, 2018.

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The current average forecasts among economists polled include the following:

GDP:

full-year 2018:  3.1%

full-year 2019:  2.4%

full-year 2020:  1.8%

full-year 2021:  1.8%

Unemployment Rate:

December 2018: 3.7%

December 2019: 3.6%

December 2020: 3.8%

December 2021: 4.1%

10-Year Treasury Yield:

December 2018: 3.24%

December 2019: 3.50%

December 2020: 3.47%

December 2021: 3.53%

CPI:

December 2018:  2.50%

December 2019:  2.30%

December 2020:  2.30%

December 2021:  2.20%

Crude Oil  ($ per bbl):

for 12/31/2018: $73.72

for 12/31/2019: $70.86

for 12/31/2020: $68.27

for 12/31/2021: $66.33

(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” label)

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I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2744.12 as this post is written