Consumer Confidence Surveys – As Of June 29, 2018

Doug Short’s site had a post of June 29, 2018 (“Michigan Consumer Sentiment:  June Final Retreats Slightly“) that displays 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)

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There are a few aspects of the above charts that I find highly noteworthy.  Of course, until the sudden upswing in 2014, 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.

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 2736.95 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – June 29, 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 June 29, 2018 titled “ECRI Weekly Leading Index Update.”  These charts are on a weekly basis through the June 29, 2018 release, indicating data through June 22, 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.:

_________

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 2740.09 as this post is written

Broad-Based Indicators Of Economic Activity

The Chicago Fed National Activity Index (CFNAI) and the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index) are two broad-based economic indicators that I regularly feature in this site.

The short-term and long-term trends of each continue to be notable.

The post on the Doug Short site of June 28, 2018, titled “The Philly Fed ADS Index Business Conditions Index Update” displays both the CFNAI MA-3 (3-month Moving Average) and ADS Index (91-Day Moving Average) from a variety of perspectives.

Of particular note, two of the charts, shown below, denote where the current levels of each reading is relative to the beginning of past recessionary periods, as depicted by the red dots.

The CFNAI MA-3:

(click on charts to enlarge images)

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The ADS Index, 91-Day MA:

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Also shown in the aforementioned post is a chart of each with a long-term trendline (linear regression) as well as a chart depicting GDP for comparison purposes.

_________

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 2716.31 as this post is written

Durable Goods New Orders – Long-Term Charts Through May 2018

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 May 2018, updated on June 27, 2018. This value is $248,755 ($ Millions):

(click on charts to enlarge images)

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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 June 27, 2018;

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 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 2699.63 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 June 21, 2018 update (reflecting data through June 15, 2018) is -1.149.

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 June 27, 2018 incorporating data from January 8, 1971 through June 22, 2018, on a weekly basis.  The June 22, 2018 value is -.81:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed June 27, 2018:

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

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The ANFCI chart below was last updated on June 27, 2018 incorporating data from January 8,1971 through June 22, 2018, on a weekly basis.  The June 22 value is -.53:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed June 27, 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 2716.43 as this post is written

Updates Of Economic Indicators June 2018

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 June 2018 Chicago Fed National Activity Index (CFNAI) updated as of June 25, 2018:

The CFNAI, with current reading of -.15:

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis, June 25, 2018;

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

The CFNAI-MA3, with current reading of .18:

Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis, June 25, 2018;

https://fred.stlouisfed.org/series/CFNAIMA3

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The ECRI WLI (Weekly Leading Index):

As of June 22, 2018 (incorporating data through June 15, 2018) the WLI was at 150.1 and the WLI, Gr. was at 3.1%.

A chart of the WLI,Gr., from the Doug Short’s site ECRI update post of June 22, 2018:

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

Here is the latest chart, depicting the ADS Index from December 31, 2007 through June 16, 2018:

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

As per the June 21, 2018 press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Increased in May” (pdf) the LEI was at 109.5, the CEI was at 103.7, and the LAG was 105.2 in May.

An excerpt from the release:

“While May’s increase in the U.S. LEI was slower than in recent months, the improvements in a majority of its components offset the declines in leading indicators of labor markets and residential construction,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. “The U.S. LEI still points to solid growth but the current trend, which is moderating, indicates that economic activity is not likely to accelerate.”

Here is a chart of the LEI from the Doug Short’s site Conference Board Leading Economic Index update of June 21, 2018:

_________

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 2717.07 as this post is written

The U.S. Economic Situation – June 25, 2018 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 June 22, 2018, with a last value of 24580.89):

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2717.07 as this post is written

Money Supply Charts Through May 2018

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 June 22, 2018 depicting data through May 2018, with a value of $15,427.5 Billion:

Here is the “MZM Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 3.7%:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed June 25, 2018:

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 June 21, 2018, depicting data through May 2018, with a value of $14,024.2 Billion:

Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 3.8%:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed June 25, 2018:

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

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2754.88 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 June 15, 2018:

from page 24:

(click on charts to enlarge images)

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from page 25:

_____

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 2762.84 as this post is written

S&P500 “Bottom Up” EPS Forecasts Years 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 June 22, 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:

$161.01/share

Year 2019 estimate:

$176.72/share

Year 2020 estimate:

$193.21/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 2749.76 as this post is written

Standard & Poor’s S&P500 EPS Estimates 2018 2019 – June 15, 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 June 15, 2018:

Year 2018 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $157.51/share

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

-From a “bottom up” perspective, “as reported” earnings of $148.23/share

Year 2019 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $174.67/share

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

-From a “bottom up” perspective, “as reported” earnings of $164.77/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 2750.23 as this post is written

Deloitte “CFO Signals” Report Q2 2018 – Notable Aspects

Recently Deloitte released their “CFO Signals” “High-Level Summary” report for the 2nd Quarter of 2018.

As seen in page 2 of the report, there were 172 survey respondents.  As stated:

“Each quarter (since 2Q10), CFO Signals has tracked the thinking and actions of CFOs
representing many of North America’s largest and most influential companies.

All respondents are CFOs from the US, Canada, and Mexico, and the vast majority are from
companies with more than $1 billion in annual revenue. For a summary of this quarter’s
response demographics, please see the sidebars and charts on this page. For other information
about participation and methodology, please contact nacfosurvey@deloitte.com.”

Here are some of the excerpts that I found notable:

from page 3:

Perceptions

How do you regard the current/future status of the North American, European, and Chinese economies? Perceptions of North America improved, with 94% of CFOs rating current conditions as good (up from 90% last quarter and a new survey high), and 52% expecting better conditions in a year (down from 59%). Perceptions of Europe declined to 47% and 36%, respectively (both metrics remain near their survey highs), and China rose to 55% (a new high) and 31%. Page 6.

What is your perception of the capital markets? Seventy-three percent of CFOs say debt financing is attractive (down from 77%). Attractiveness of equity financing decreased for public company CFOs (from 43% to 36%) and increased for private company CFOs (from 35% to 45%). Sixty-three percent of CFOs now say US equities are overvalued—the lowest level in two years. Page 7.

Sentiment

Overall, what risks worry you the most? CFOs express strong external concerns about US politics (especially around trade policy), while concerns about economic risks, which had subsided over the last few quarters, began to rise. They again cite pressure to execute on their growth plans, voicing growing internal concerns about driving initiatives and finding talent. Page 8.

Compared to three months ago, how do you feel about the financial prospects for your company? The net optimism index fell from last quarter’s survey-high +54 to +39 (still quite strong). Forty-eight percent of CFOs express rising optimism (down from 59%), and 9% express declining optimism. Page 9.

Expectations

What is your company’s business focus for the next year? CFOs indicate a survey-high bias toward revenue growth over cost reduction (67% vs. 17%) and a somewhat lower bias toward investing cash over returning it (56% vs. 18%).

The bias toward new offerings over current ones grew this quarter (40% vs. 35%), and the bias toward current geographies over new ones increased slightly (59% vs. 16%). Page 10.

Compared to the past 12 months, how do you expect your key operating metrics to change over the next 12 months? Revenue growth expectations rose from 5.9% to 6.3% (the highest level in nearly four years). Earnings growth rose from 9.8% to 10.3% (a three-year high). Capital investment slid from 11.0% to 10.4% (still among its six-year highs). Domestic hiring rose from 3.1% to 3.2% (a new high). Technology and Retail/Wholesale showed substantial improvement. Page 11.

from page 9:

Sentiment

Optimism regarding own-companies’ prospects

After hitting a new high last quarter, net optimism declined this quarter, but remains relatively strong—despite substantial weakness in Mexico and Healthcare/Pharma.

Net optimism hit a survey-high +50 in 1Q17, then another new high last quarter at +54. This quarter’s net optimism declined to +39— significantly down, but still quite strong by historical standards. Forty-eight percent of CFOs expressed rising optimism (down from 59%), and 9% cited declining optimism (up from 6%).

Net optimism for the US declined from +55 last quarter to +42 this quarter. Canada declined from +47 to +33, while optimism in Mexico fell sharply from +38 to zero.

Sentiment was particularly strong in Services and Technology—both of which came in above +50. Retail/Wholesale and Manufacturing both declined sharply from last quarter’s highs (both were above +60). Healthcare/Pharma declined sharply to -33.

Please see the full report for charts specific to individual industries and countries.

from page 11:

Expectations

Growth in key metrics, year-over-year

After hitting multi-year highs last quarter, key growth metrics continued to climb this quarter. Capital spending remained strong in the US, but weakened in Canada and Mexico. Technology, and Retail/Wholesale showed substantial improvement.

Revenue growth rose from 5.9% to 6.3%, its highest level in nearly four years. The US rose to a two-year high. Canada rose above its two-year average, and Mexico rose to a three-year high. Technology leads; Services and Manufacturing trail.

Earnings growth rose from 9.8% to 10.3%, its highest level in three years. The US declined slightly, but remains near its three-year high. Canada rose to its highest level in nearly four years, while Mexico rose to its five-year high. Technology* leads; Healthcare/Pharma trails.

Capital investment declined from 11.0% to 10.4%, but remains at one of the highest levels in the last six years. The US remained near its five-year high. Canada declined and is below its two-year average; Mexico declined sharply to near its two-year average. Manufacturing and Retail/Wholesale are again highest; Healthcare/Pharma and Technology are lowest.

Domestic personnel growth rose from 3.1% to 3.2%, a new survey high. The US remained at last quarter’s high; Canada rose to its second-highest level in five years; Mexico rose to its second highest level in three years. Technology and Retail/Wholesale lead; T/M/E* trails.

Please see the full report for charts specific to individual industries and countries.

* Please note that, due to a very small sample size,

T/M/E was not used as an industry comparison point.

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Among the various charts and graphics in the report are graphics depicting trends in “Own Company Optimism” on page 9 and “Economic Optimism” found on page 6.

_____

I post various business and economic surveys 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 surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2767.32 as this post is written