Advisor Perspectives had a post of March 31, 2023 (“Michigan Consumer Sentiment Drops for First Time in Four Months“) that displays the latest Conference Board Consumer Confidence and University of Michigan Consumer Sentiment Index charts. They are presented below:
(click on charts to enlarge images)
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While I don’t believe that confidence surveys should be overemphasized, I find these readings and trends to be notable, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.
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The Special Note summarizes my overall thoughts about our economic situation
The American public continues to rate the U.S. economy in mostly negative terms in March, with 83% describing current economic conditions as “only fair” or “poor.” Just 16% consider them “excellent” or “good.” Furthermore, 72% think conditions are getting worse, while 23% say they are improving.
also:
Gallup combines Americans’ rating of current economic conditions with their perception of the economy’s direction to create its Economic Confidence Index. This month’s index score is -38, which is the average of Americans’ net-positive rating of current conditions (the percentage rating the economy as excellent or good minus the percentage rating it poor) and their net-positive outlook score (the percentage saying the economy is getting better minus the percentage saying it is getting worse).
The index has a theoretical range of +100 (if all respondents rate the economy as excellent or good and say it’s improving) to -100 (if all rate it as poor and say it’s getting worse). In practice, the highest the index has been since Gallup began tracking the component questions in 1992 was +56 in January 2000, and the lowest was -72 in October 2008.
Here is an accompanying chart of the Gallup Economic Confidence Index:
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The Special Note summarizes my overall thoughts about our economic situation
The St. Louis Fed’s Financial Stress Index (STLFSI4) is one index that is supposed to measure stress in the financial system. Its reading as of the March 30, 2023 update (reflecting data through March 24, 2023) is .3406:
source: Federal Reserve Bank of St. Louis, St. Louis Fed Financial Stress Index [STLFSI4], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed March 30, 2023: https://fred.stlouisfed.org/series/STLFSI4
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 March 29, 2023 incorporating data from January 8, 1971 through March 24, 2023 on a weekly basis. The March 24 value is -.12072:
The ANFCI chart below was last updated on March 29, 2023 incorporating data from January 8, 1971 through March 24, 2023, on a weekly basis. The March 24, 2023 value is -.05930:
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.
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The Special Note summarizes my overall thoughts about our economic situation
In the last post (“4th Quarter 2022 Corporate Profits“) I displayed, for reference purposes, a long-term chart depicting Corporate Profits After Tax.
There are many ways to view this measure, both on an absolute as well as relative basis.
One relative measure is viewing Corporate Profits as a Percentage of GDP. I feel that this metric is important for a variety of reasons. As well, the measure is important to a variety of parties, including investors, businesses, and government policy makers.
As one can see from the long-term chart below (updated through the fourth quarter), (After Tax) Corporate Profits as a Percentage of GDP is still at levels that can be seen as historically high. While there are many reasons as to why this is so, from a going-forward standpoint I think it is important to recognize both that such a notable condition exists, as well as contemplate and/or plan for such factors and conditions that would come about if (and in my opinion “when”) a more historically “normal” ratio of Corporate Profits as a Percentage of GDP occurs. This topic can be very complex in nature, and depends upon myriad factors. In my opinion it deserves far greater recognition.
(click on chart to enlarge image)
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed March 30, 2023
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The Special Note summarizes my overall thoughts about our economic situation
Today’s (March 30, 2023) GDP release (Q4 2022, Third Estimate) was accompanied by the Bureau of Economic Analysis (BEA) Corporate Profits report (Preliminary Estimate) for the 4th Quarter.
Of course, there are many ways to adjust and depict overall Corporate Profits. For reference purposes, here is a chart from the St. Louis Federal Reserve (FRED) showing the Corporate Profits After Tax (without IVA and CCAdj) (last updated March 30, 2023 with a value of $2721.294 Billion SAAR):
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Here is the Corporate Profits After Tax measure shown on a Percentage Change from a Year Ago perspective (value of -1.4%):
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Corporate Profits After Tax [CP]; U.S. Department of Commerce: Bureau of Economic Analysis; accessed March 30, 2023; https://research.stlouisfed.org/fred2/series/CP
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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
On March 29, 2023 The CFO Survey (formerly called the “Duke/CFO Global Business Outlook”) was released. It contains a variety of statistics regarding how CFOs view business and economic conditions.
In the CFO Survey press release, I found the following to be the most notable excerpts – although I don’t necessarily agree with them:
Financial decision-makers became slightly more optimistic about the U.S. economy and increased their expectations for real GDP growth in 2023, while citing labor availability and inflation as the most pressing concerns for their company, according to the results of The CFO Survey, a collaboration of Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta.
The survey, which closed on March 10, found that CFO optimism about the U.S. economy was 55 on a scale of 0 to 100, modestly higher than last quarter but well below the historic average of about 60. Additionally, CFOs revised upward their expectations for real GDP growth over the next four quarters to 1.4 percent from 0.7 percent in the prior survey. Moreover, the probability respondents assigned to negative year-ahead economic growth fell from 31 percent last quarter to 19 percent this quarter.
The CFO Survey contains an Optimism Index chart, with the blue line showing U.S. Optimism (with regard to the economy) at 55.0, as seen below:
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It should be interesting to see how well the CFOs predict business and economic conditions going forward. I discussed past various aspects of this, and the importance of these predictions, in the July 9, 2010 post titled “The Business Environment”.
(past posts on CEO and CFO surveys can be found under the “CFO and CEO Confidence” 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.
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The Special Note summarizes my overall thoughts about our economic situation
For reference purposes, below are two sets of charts depicting growth in the money supply.
The first shows the M1, defined in FRED as the following:
Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.
Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.
Here is the “M1 Money Stock” (seasonally adjusted) chart, updated on March 28, 2023 depicting data through February 2023, with a value of $19,336.7 Billion:
Here is the “M1 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of -5.8%:
Data Source: Board of Governors of the Federal Reserve System (US), M1 Money Stock [M1SL], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed March 28, 2023: https://fred.stlouisfed.org/series/M1SL
The second set shows M2, defined in FRED as the following:
Before May 2020, M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000) less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market funds (MMFs) less IRA and Keogh balances at MMFs.
Beginning May 2020, M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs. Seasonally adjusted M2 is constructed by summing savings deposits (before May 2020), small-denomination time deposits, and retail MMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.
Here is the “M2 Money Stock” (seasonally adjusted) chart, updated on March 28, 2023, depicting data through February 2023, with a value of $21,062.5 Billion:
Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of -2.4%:
Data Source: Board of Governors of the Federal Reserve System (US), M2 Money Stock [M2SL], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed March 28, 2023: https://fred.stlouisfed.org/series/M2SL
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The Special Note summarizes my overall thoughts about our economic situation
As a reference for long-term house price index trends, below is a chart, updated with the most current data (through January) from the CalculatedRisk blog post of March 28, 2023 titled “Case-Shiller : National House Price Index…“:
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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.
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The Special Note summarizes my overall thoughts about our economic situation
