Friday, November 15, 2019

Philadelphia Fed – 4th Quarter 2019 Survey Of Professional Forecasters

The Philadelphia Fed 4th Quarter 2019 Survey of Professional Forecasters was released on November 15, 2019.  This survey is somewhat unique in various regards, such as it incorporates a longer time frame for various measures.
The survey shows, among many measures, the following median expectations:
Real GDP: (annual average level)
full-year 2019:  2.3%
full-year 2020:  1.8%
full-year 2021:  2.0%
full-year 2022:  2.0%
Unemployment Rate: (annual average level)
for 2019: 3.7%
for 2020: 3.7%
for 2021: 3.7%
for 2022: 3.9%
Regarding the risk of a negative quarter in real GDP in any of the next few quarters, mean estimates are 12.8%, 18.1%, 20.8%, 22.6%, and 25.1% for each of the quarters from Q4 2019 through Q4 2020, respectively.
As well, there are also a variety of time frames shown (present quarter through the year 2028) with the median expected inflation (annualized) of each.  Inflation is measured in Headline and Core CPI and Headline and Core PCE.  Over all time frames expectations are shown to be in the 1.5% to 2.3% range.
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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.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 3115.24 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – November 15, 2019 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 November 15, 2019 titled “ECRI Weekly Leading Index Update.”  These charts are on a weekly basis through the November 15, 2019 release, indicating data through November 8, 2019.
Here is the ECRI WLI (defined at ECRI’s glossary):
ECRI WLI 146.2
This next chart depicts, on a long-term basis, the Year-over-Year change in the 4-week moving average of the WLI:
ECRI WLI YoY of the Four-Week Moving Average
This last chart depicts, on a long-term basis, the WLI, Gr.:
ECRI 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 3113.69 as this post is written

Thursday, November 14, 2019

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 November 7, 2019 update (reflecting data through November 1, 2019) is -1.324.
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 November 14, 2019 incorporating data from January 8, 1971 through November 8, 2019, on a weekly basis.  The November 8 value is -.76:
NFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 14, 2019: 
http://research.stlouisfed.org/fred2/series/NFCI
The ANFCI chart below was last updated on November 14, 2019 incorporating data from January 8, 1971 through November 8, 2019, on a weekly basis.  The November 8 value is -.63:
ANFCI
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed November 14, 2019: 
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 3094.04 as this post is written

Charts Indicating Economic Weakness – November 2019

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 November 2019 Wall Street Journal Economic Forecast Survey the consensus (average estimate) among various economists is for 2.1% GDP growth in 2019 and 1.7% GDP growth in 2020.  However, 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.

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:

Total Federal Receipts

“Total Federal Receipts” growth continues to be intermittent in nature since 2015.  As well, the level of growth does not seem congruent to the (recent) levels of economic growth as seen in aggregate measures such as Real GDP.
“Total Federal Receipts” through October had a last monthly value of $245,520 Million.  Shown below is the measure displayed on a “Percent Change From Year Ago” basis with value -2.8%, last updated November 13, 2019:
Total Federal Receipts Percent Change From Year Ago
source:  U.S. Department of the Treasury. Fiscal Service, Total Federal Receipts [MTSR133FMS], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed November 13, 2019: 
https://fred.stlouisfed.org/series/MTSR133FMS
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The Chicago Fed National Activity Index (CFNAI)

A broad-based economic indicator that has been implying weaker growth or mild contraction is the Chicago Fed National Activity Index (CFNAI).
The October 2019 Chicago Fed National Activity Index (CFNAI) updated as of October 28, 2019:
The CFNAI, with current reading of -.45:
CFNAI
source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed October 28, 2019:
https://fred.stlouisfed.org/series/CFNAI
The CFNAI-MA3 (CFNAI three-month moving average) with current reading of -.24:
CFNAIMA3
source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index: Three Month Moving Average [CFNAIMA3], retrieved from FRED, Federal Reserve Bank of St. Louis; October 28, 2019:
https://fred.stlouisfed.org/series/CFNAIMA3
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The Aruoba-Diebold-Scotti Business Conditions Index (ADS Index)

Another broad-based economic indicator that seems to imply a weaker recent growth rate is the Aruoba-Diebold-Scotti Business Conditions Index (ADS Index.)
Below is a chart of the index from December 31, 2007 through November 2, 2019, with a value of -.1673, as of the November 7 update:
source:  Federal Reserve Bank of Philadelphia, Aruoba-Diebold-Scotti Business Conditions Index (ADS Index)
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Unemployment

I have written extensively concerning unemployment, as the current and future unemployment issue is of tremendous importance.
The consensus belief is that employment remains robust, citing total nonfarm payroll growth and the current unemployment rate of 3.6%.  However, my analyses continue to indicate that the conclusion that employment is strong is incorrect.  While the unemployment rate indicates that unemployment is (very) low, closer examination indicates that this metric is, for a number of reasons, highly misleading.
My analyses indicate that the underlying dynamics of the unemployment situation remain exceedingly worrisome, especially with regard to the future.  These dynamics are numerous and complex, and greatly lack recognition and understanding, especially as how from an “all-things-considered” standpoint they will evolve in an economic and societal manner.  I have discussed the overall current and future U.S. employment situation on the “U.S. Employment Trends” page.
While there are many charts that can be shown, one that depicts a worrisome trend is the  Civilian Labor Force Participation Rate for those with a Bachelor’s Degree and Higher, 25 years and over.  Among disconcerting aspects of this measure is the long-term (most notably the post-2009) trend, especially given this demographic segment.
The current value as of the November 1, 2018 update (reflecting data through the October employment report) is 73.8%:
source:  U.S. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: Bachelor’s Degree and Higher, 25 years and over [LNS11327662], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed November 11, 2019: https://fred.stlouisfed.org/series/LNS11327662
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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 3094.04 as this post is written

Wednesday, November 13, 2019

10-Year Treasury Yields – Two Long-Term Charts As Of November 12, 2019

I have written extensively about the importance of U.S. interest rate levels.  Rising interest rates have substantial ramifications for many aspects of the current-day economy.  My commentaries with regard to interest rates and the bond bubble are largely found under the “bond bubble” label.   From an intervention perspective commentary is found under the “Intervention” label.
As reference, below is a long-term chart of the 10-Year Treasury yield since 1980, depicted on a monthly basis, LOG scale:
(click on charts to enlarge images)(charts courtesy of StockCharts.com; chart creation and annotation by the author)
10-Year Treasury Yield chart
Here is a long-term chart of the 10-Year Treasury yield since 2008, depicted on a daily basis, LOG scale:
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 3091.84 as this post is written

Friday, November 8, 2019

Building Financial Danger – November 8, 2019 Update

My overall analysis indicates a continuing elevated and growing level of financial danger which contains many worldwide and U.S.-specific “stresses” of a very complex nature. I have written numerous posts on this site concerning both ongoing and recent “negative developments.”  These developments, as well as other exceedingly problematical conditions, have presented a highly perilous economic environment that endangers the overall financial system.
Also of ongoing immense importance is the existence of various immensely large asset bubbles, a subject of which I have extensively written.  While all of these asset bubbles are wildly pernicious and will have profound adverse future implications, hazards presented by the bond market bubble are especially notable.
Predicting the specific timing and extent of a stock market crash is always difficult, and the immense complexity of today’s economic situation makes such a prediction even more challenging. With that being said, my analyses continue to indicate that a near-term exceedingly large (from an ultra long-term perspective) stock market crash – that would also involve (as seen in 2008) various other markets – will occur. [note: the “next crash” and its aftermath has paramount significance and implications, as discussed in the post of January 6, 2012 titled “The Next Crash And Its Significance“ and various subsequent posts in the “Economic Depression” label]
As reference, below is a daily chart since 2008 of the S&P500 (through November 7, 2019 with a last price of 3085.18), depicted on a LOG scale, indicating both the 50dma and 200dma as well as price labels:
(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)
S&P500 since 2008
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 3085.18 as this post is written

The November 2019 Wall Street Journal Economic Forecast Survey

The November 2019 Wall Street Journal Economic Forecast Survey was published on November 7, 2019.  The headline is “WSJ Survey: Economists Split on Causes of Hiring Slowdown.”
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:
Economists are roughly split over whether the recent hiring slowdown reflects primarily a shortage of workers or softening demand for labor, a sign of continuing uncertainty about the outlook.
In The Wall Street Journal’s latest survey of economists, 45.3% blamed the slowdown on the tight labor market, which has made it harder for many employers to find enough workers. An additional 37.7% of respondents said the issue was ebbing desire to expand payrolls.
As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 30.19%. The individual estimates, of those who responded, ranged from 10% to 60%.  For reference, the average response in October’s survey was 34.19%.
As stated in the article, the survey’s 57 respondents were academic, financial and business economists.  Not every economist answered every question.  The survey was conducted November 1 – November 5, 2019.

Economic Forecasts

The current average forecasts among economists polled include the following:

GDP:

full-year 2019:  2.08%
full-year 2020:  1.72%
full-year 2021:  1.96%
full-year 2022:  1.94%

Unemployment Rate:

December 2019: 3.60%
December 2020: 3.79%
December 2021: 3.97%
December 2022: 4.03%

10-Year Treasury Yield:

December 2019: 1.76%
December 2020: 1.97%
December 2021: 2.29%
December 2022: 2.51%

CPI:

December 2019:  1.93%
December 2020:  2.00%
December 2021:  2.15%
December 2022:  2.16%

Crude Oil  ($ per bbl):

for 12/31/2019: $56.09
for 12/31/2020: $55.10
for 12/31/2021: $58.26
for 12/31/2022: $59.12
(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 3085.18 as this post is written

Thursday, November 7, 2019

Deflation Probabilities – November 7, 2019 Update

While I do not agree with the current readings of the measure – I think the measure dramatically understates the probability of deflation, as measured by the CPI – the Federal Reserve Bank of Atlanta maintains an interesting data series titled “Deflation Probabilities.”
As stated on the site:
Using estimates derived from Treasury Inflation-Protected Securities (TIPS) markets, described in a technical appendix, this weekly report provides two measures of the probability of consumer price index (CPI) deflation through 2024.
A chart shows the trends of the probabilities.  As one can see in the chart, the readings are volatile.
As for the current weekly reading, the November 7, 2019 update states the following:
The 2019–24 deflation probability increased from 0 percent to 2 percent on November 1 before falling from 2 percent to 0 percent on November 5 and remaining there on November 6. The 2018–23 deflation probability was 0 percent on November 6, where it has remained since July 8. These deflation probabilities, measuring the likelihoods of net declines in the Consumer Price Index over the five-year periods starting in early 2018 and early 2019, are estimated from prices of the five-year Treasury Inflation-Protected Securities (TIPS) issued in April 2018 and April 2019 and the 10-year TIPS issued in July 2013 and July 2014.
_________
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 3082.13 as this post is written

Another Recession Probability Indicator – Updated Through Q2 2019

Each month I have been highlighting various estimates of U.S. recession probabilities.  The latest update was that of November 6, 2019, titled “Recession Probability Models – November 2019.”
While I don’t agree with the methodologies employed or the probabilities of impending economic weakness as depicted by these and other estimates, I do believe that the results of these models and estimates should be monitored.
Another probability of recession is provided by James Hamilton, and it is titled “GDP-Based Recession Indicator Index.”  A description of this index, as seen in FRED:
This index measures the probability that the U.S. economy was in a recession during the indicated quarter. It is based on a mathematical description of the way that recessions differ from expansions. The index corresponds to the probability (measured in percent) that the underlying true economic regime is one of recession based on the available data. Whereas the NBER business cycle dates are based on a subjective assessment of a variety of indicators that may not be released until several years after the event , this index is entirely mechanical, is based solely on currently available GDP data and is reported every quarter. Due to the possibility of data revisions and the challenges in accurately identifying the business cycle phase, the index is calculated for the quarter just preceding the most recently available GDP numbers. Once the index is calculated for that quarter, it is never subsequently revised. The value at every date was inferred using only data that were available one quarter after that date and as those data were reported at the time.
If the value of the index rises above 67% that is a historically reliable indicator that the economy has entered a recession. Once this threshold has been passed, if it falls below 33% that is a reliable indicator that the recession is over.
Additional reference sources for this index and its construction can be seen in the Econbrowser post of February 14, 2016 titled “Recession probabilities” as well as on the “The Econbrowser Recession Indicator Index” page.
Below is a chart depicting the most recent value of 3.90%, for the second quarter of 2019, last updated on November 6, 2019 (after the October 30, 2019 Gross Domestic Product, Third Quarter 2019 (Advance Estimate) (pdf)):

GDP-Based Recession Indicator Index

source:  Hamilton, James, GDP-Based Recession Indicator Index [JHGDPBRINDX], retrieved from FRED, Federal Reserve Bank of St. Louis on November 7, 2019:
https://research.stlouisfed.org/fred2/series/JHGDPBRINDX
_________
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 3076.78 as this post is written