Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – January 29, 2016 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 Doug Short’s blog post of January 29, 2016 titled “ECRI Weekly Leading Index:  Fractional Decrease from the Previous Week.”  These charts are on a weekly basis through the January 29, 2016 release, indicating data through January 22, 2016.

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

–

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

–

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

_________

I post various economic 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 1929.82 as this post is written

Consumer Confidence Surveys – As Of January 29, 2016

Doug Short had a blog post of January 29, 2016 (“Michigan Consumer Sentiment:  January Final Fractionally Below December“) in which he presents the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:

(click on charts to enlarge images)

–

–

There are a few aspects of the above charts that I find highly noteworthy.  Of course, until the recent sudden upswing, the continued subdued absolute levels of these two surveys was disconcerting.

Also, I find the “behavior” of these readings to be quite disparate as compared to the other post-recession periods, as shown in the charts between the gray shaded areas (the gray areas denote recessions as defined by the NBER.)

While I don’t believe that confidence surveys should be overemphasized, I find these readings to be very problematical, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1926.42 as this post is written

Velocity Of Money – Charts Updated Through January 29, 2016

Here are three charts from the St. Louis Fed depicting the velocity of money in terms of the MZM, M1 and M2 money supply measures.

All charts reflect quarterly data through the 4th quarter of 2015, and were last updated as of January 29, 2016.  As one can see, two of the three measures are at an all-time low for the periods depicted:

Velocity of MZM Money Stock, current value = 1.325:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 29, 2016:

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

–

Velocity of M1 Money Stock, current value = 5.907:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 29, 2016:

http://research.stlouisfed.org/fred2/series/M1V

–

Velocity of M2 Money Stock, current value = 1.48:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 29, 2016:

http://research.stlouisfed.org/fred2/series/M2V

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1924.97 as this post is written

Real GDP Chart Since 1947 With Trendline – 4th Quarter 2015

For reference purposes, below is a chart from Doug Short’s “Q4 GDP Advance Estimate at .7%, Down from Q3 Third Estimate” post of January 29, 2016, depicting Real GDP, with a trendline, as depicted.  This chart reflects the Gross Domestic Product Q4 2015 Advance Estimate (pdf) of January 29, 2016:

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1925.09 as this post is written

Employment Cost Index (ECI) – Fourth Quarter 2015

While the concept of Americans’ incomes can be defined in a number of ways, many prominent measures continue to show disconcerting trends.

One prominent measure is the Employment Cost Index (ECI).

Here is a description from the BLS document titled “The Employment Cost Index:  what is it?“:

The Employment Cost Index (ECI) is a quarterly measure of the change in the price of labor, defined as compensation per employee hour worked. Closely watched by many economists, the ECI is an indicator of cost pressures within companies that could lead to price inflation for finished goods and services. The index measures changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. As a fixed-weight, or Laspeyres, index, the ECI controls for changes occurring over time in the industrial-occupational composition of employment.

On January 29, 2016, the ECI for the fourth quarter was released.  Here is an excerpt from the January 29, 2016 Wall Street Journal article titled “U.S. Employment Costs Rose .6%, Little Sign of Wage Pressure“:

The employment-cost index, a broad measure of workers’ wages and benefits, grew 0.6% in the final three months of 2015, the Labor Department said Friday. That matched the prior quarter’s growth and fell in line with expectations of economists surveyed by The Wall Street Journal.

Wages and salaries, reflecting more than two-thirds of compensation costs, grew 0.6% last quarter. Benefits rose 0.7%.

Despite steady income growth in recent quarters, Americans aren’t seeing the kind of boost in their paychecks that would be expected given the long run of steady job growth. Overall compensation rose 2% last year, with wages and salaries up 2.1%, too modest to significantly lift Americans’ living standards and fuel stronger economic growth.

Below are three charts, updated on January 29, 2016 that depict various aspects of the ECI.

The first depicts the ECI, with a value of 125.2:

source: US. Bureau of Labor Statistics, Employment Cost Index: Total compensation: All Civilian[ECIALLCIV], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed January 29, 2016:

https://research.stlouisfed.org/fred2/series/ECIALLCIV/

The second chart depicts the ECI on a “Percent Change from Year Ago” basis:

The third chart depicts the ECI on a “Percent Change” (from last quarter) basis:

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1915.97 as this post is written

Durable Goods New Orders – Long-Term Charts Through December 2015

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.

For reference, below are two charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through December, updated on January 28, 2016. This value is $225,422 ($ Millions):

(click on charts to enlarge images)

–

Second, here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis:

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 28, 2016;

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

_________

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 1884.69 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 January 21, 2016 update (reflecting data through January 15) is -.416.

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 January 27, 2016 incorporating data from January 5,1973 to January 22, 2016, on a weekly basis.  The January 22, 2016 value is -.56:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 27, 2016:

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

–

The ANFCI chart below was last updated on January 27, 2016 incorporating data from January 5,1973 to January 22, 2016, on a weekly basis.  The January 22 value is -.09:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 27, 2016:

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 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 1907.49 as this post is written

U.S. Deflation – January 27, 2016 Update

This post provides an update to various past posts discussing deflation and “deflationary pressures,” including the most recent post, that of September 21, 2015 titled “U.S. Deflation – September 21, 2015 Update.”   I have extensively written of “deflationary pressures” and deflation as I continue to believe that prolonged and deep 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.]

The subject of deflation contains many complex aspects, and accordingly no short discussion can even begin to be a comprehensive discussion of such.  However, in this post I would like to highlight some recent notable developments.

Of note, the shortfall between the Federal Reserve’s stated inflation target (2% on the PCE Price Index) and the actual inflation reading continues.  This 2% inflation target has been “missed” (inflation has been less than 2%) for well over three years.  For reference, here is a chart of the PCE Price Index from Doug Short’s post of December 23, 2015, titled “The Core PCE Price Index Remains Disappointingly Below Target“:

The issue of inflation continuing to be below the 2% target seems to be receiving more public discussion by the Federal Reserve.  In the December 16, 2015 FOMC Press Conference Fed Chair Janet Yellen said the following:

Since March, the Committee has stated that it would raise the target range for the federal funds rate when it had seen further improvement in the labor market and was reasonably confident that inflation would move back to its 2 percent objective over the medium term. In our judgment, these two criteria have now been satisfied.

There are many surveys containing inflation expectations as well as “market-based” measures of the same.  One survey is the Federal Reserve’s December 16, 2015 “Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, December 2015“ (pdf); another survey can be seen in the January 2016 Wall Street Journal Economic Forecast Survey.  It should be noted that neither of these surveys shows future PCE or CPI figures below zero.

As well, The University of Michigan’s “Inflation Expectations” survey shows stable inflation expectations, and prominent surveys of corporate expectations of inflation, such as the Federal Reserve Bank of Atlanta’s Business Inflation Expectations (BIE) are also relatively stable, with the January 2016 survey showing an anticipated 1.8 percent inflation over the next year.

“Market-based” measures of inflation expectations include the Federal Reserve Bank of Atlanta’s series titled “Deflation Probabilities,” which has recently noticeably increased, but still remains low at 6% as of the January 20, 2016 reading.

Another “market-based” measure of inflation is the “10-Year Breakeven Inflation Rate,” described in FRED as:

The breakeven inflation rate represents a measure of expected inflation derived from 10-Year Treasury Constant Maturity Securities (http://research.stlouisfed.org/fred2/series/DGS10 ) and 10-Year Treasury Inflation-Indexed Constant Maturity Securities (http://research.stlouisfed.org/fred2/series/DFII10 ). The latest value implies what market participants expect inflation to be in the next 10 years, on average.

Here is the long-term chart, with a reading of 1.32 percent as of January 20, 2016:

source:  Federal Reserve Bank of St. Louis, 10-Year Breakeven Inflation Rate [T10YIE], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/T10YIE/, January 26, 2016.

While neither the inflation surveys or “market-based” measures depict a deflationary situation – or provide strong indications of impending deflation – is it correct to assume that they would?  For many reasons I don’t believe that they will provide significant “advance” warning of impending deflation.

While deflation has many attributes and causes, one of its characteristics is its relative rarity since the beginning of the 20th Century.  As I mentioned in the November 14, 2013 post (“Thoughts Concerning Deflation”):

Given that deflationary episodes have been recently relatively nonexistent, “seeing” and “proving” explicit signs of such an impending condition is especially challenging.

I continue to believe that the many continuing signs of “deflationary pressures” is a foreboding.  Among these signs is the pronounced weakness in many commodities.  One such measure is the Bloomberg Commodity Index, as seen below:

(charts courtesy of StockCharts.com; chart creation and annotation by the author)

Another manifestation of deflationary pressures is seen in U.S. import and export prices.

Still another sign is economic weakness.  While there is widespread consensus that U.S. economic growth remains stable, my analyses indicates that the economy continues to have many problematical areas of weakness and the widespread consensus concerning current and future economic stability is (substantially) incorrect.

In conclusion, I continue to believe that significant (in extent and duration) U.S. deflation is on the horizon.  As discussed in the aforementioned November 14, 2013 post, deflation often accompanies financial system distress.  My analyses continue to show an exceedingly complex future financial condition in which an exceedingly large “financial system crash” will occur, during  and after which outright deflation will both accompany and exacerbate economic and financial conditions.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1903.63 as this post is written

Money Supply Charts Through December 2015

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 22, 2016 depicting data through December 2015, with a value of $13,747.6 Billion:

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 25, 2016:

https://research.stlouisfed.org/fred2/series/MZMSL

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 21, 2016, depicting data through December 2015, with a value of $12,330.6 Billion:

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 25, 2016:

https://research.stlouisfed.org/fred2/series/M2SL

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1906.90 as this post is written

Updates Of Economic Indicators January 2016

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 2016 Chicago Fed National Activity Index (CFNAI) updated as of January 22, 2016: (current reading of -.22; current reading of CFNAI-MA3 is -.24):

–

The ECRI WLI (Weekly Leading Index):

As of January 22, 2016 (incorporating data through January 15, 2016) the WLI was at 130.2 and the WLI, Gr. was at -1.9%.

A chart of the WLI,Gr., from Doug Short’s post of January 22, 2016, titled “ECRI Weekly Leading Index: Decrease from the Previous Week“:

–

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

Here is the latest chart, depicting the ADS Index from December 31, 2007 through January 16, 2016:

–

The Conference Board Leading (LEI), Coincident (CEI) Economic Indexes, and Lagging Economic Indicator (LAG):

As per the January 22, 2016 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Declined Slightly,” (pdf) the LEI was at 123.7, the CEI was at 113.0, and the LAG was 119.9 in December.

An excerpt from the January 22 release:

“The U.S. LEI fell slightly in December, led by a drop in housing permits and weak new orders in manufacturing,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “However, the index continues to suggest moderate growth in the near-term despite the economy losing some momentum at the end of 2015. While the LEI’s growth rate has been on the decline, it’s too early to interpret this as a substantial rise in the risk of recession.”

Here is a chart of the LEI from Doug Short’s blog post of January 22 titled “Conference Board Leading Economic Index: Slight Decrease in December“:

_________

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 1893.90 as this post is written

The U.S. Economic Situation – January 22, 2016 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)

“A Special Note On Our Economic Situation”

“Forewarning Pronounced Economic Weakness”

“Thoughts Concerning The Next Financial Crisis”

“Was A Depression Successfully Avoided?”

“Has the Financial System Strengthened Since the Financial Crisis?”

“The Next Crash And Its Significance”

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 15, 2016, with a last value of 15988.08):

(click on chart to enlarge image)(chart courtesy of StockCharts.com)

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1868.99 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 January 21, 2016 update (reflecting data through January 15) is -.416.

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 January 21, 2016 incorporating data from January 5,1973 to January 15, 2016, on a weekly basis.  The January 15, 2016 value is -.55:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 21, 2016:

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

–

The ANFCI chart below was last updated on January 21, 2016 incorporating data from January 5,1973 to January 15, 2016, on a weekly basis.  The January 15 value is -.05:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 21, 2016:

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 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 1873.09 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 January 15, 2016:

from page 25:

(click on charts to enlarge images)

–

from page 26:

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog 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 1881.33 as this post is written