Monday, May 23, 2022

Updates Of Economic Indicators May 2022

The following 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 May 2022 Chicago Fed National Activity Index (CFNAI) updated as of May 23, 2022:

The CFNAI, with a current reading of .47:

CFNAI .47

source:  Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed May 23, 2022: 
https://fred.stlouisfed.org/series/CFNAI

The CFNAI-MA3, with a current reading of .48:

CFNAIMA3 .48

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; accessed May 23, 2022: 
https://fred.stlouisfed.org/series/CFNAIMA3

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

The ADS Index as of May 19, 2022, reflecting data from March 1, 1960 through May 14, 2022, with last value .501108:

ADS Index .501108

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

As per the May 19, 2022 Conference Board press release, titled “The Conference Board Leading Economic Index (LEI) for the U.S. Fell in April” the LEI was 119.2 in April, the CEI was 108.8 in April, and the LAG was 111.6 in April.

An excerpt from the release:

“The US LEI declined in April largely due to weak consumer expectations and a drop in residential building permits,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “Overall, the US LEI was essentially flat in recent months which is in line with a moderate growth outlook in the near-term. A range of downside risks—including inflation, rising interest rates, supply chain disruptions, and pandemic-related shutdowns, particularly in China—continue to weigh on the outlook. Nevertheless, we project the US economy should resume expanding in Q2 following Q1’s contraction in real GDP. Despite downgrades to previous forecasts, The Conference Board still projects 2.3 percent year-over-year US GDP growth in 2022.”

Here is a chart of the LEI from the Advisor Perspectives’ Conference Board Leading Economic Index update of May 19, 2022:

Conference Board LEI 119.2

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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

SPX at 3969.57 as this post is written

The U.S. Economic Situation – May 23, 2022 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)
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 May 20, 2022, with a last value of 31,261.90):

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

DJIA since 1900

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 3901.36 as this post is written

Thursday, May 19, 2022

Chicago Fed National Financial Conditions Index (NFCI)

The St. Louis Fed’s Financial Stress Index (STLFSI3) is one index that is supposed to measure stress in the financial system. Its reading as of the May 19, 2022 update (reflecting data through May 13, 2022) is -.8100:

STLFSI3

source: Federal Reserve Bank of St. Louis, St. Louis Fed Financial Stress Index [STLFSI3], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed May 19, 2022: https://fred.stlouisfed.org/series/STLFSI3

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 May 18, 2022 incorporating data from January 8, 1971 through May 13, 2022 on a weekly basis.  The May 13 value is -.22522:

NFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 19, 2022:  
http://research.stlouisfed.org/fred2/series/NFCI

The ANFCI chart below was last updated on May 18, 2022 incorporating data from January 8, 1971 through May 13, 2022, on a weekly basis.  The May 13, 2022 value is .01238:

ANFCI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 19, 2022:  
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 3916.68 as this post is written

Tuesday, May 17, 2022

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” report of May 13, 2022:

from page 28:

(click on charts to enlarge images)

S&P500 Earnings Forecasts 2022 & 2023

from page 29:

S&P500 EPS 2012-2023

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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 4060.08 as this post is written

Monday, May 16, 2022

S&P500 EPS Estimates For 2022-2024 And Prior Years’ Realized EPS

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

The following estimates are from Exhibit 24 of the “S&P500 Earnings Scorecard” (pdf) of May 13, 2022, 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/share; the Year 2016 value is $118.10/share; the Year 2017 value is $132.00/share; the Year 2018 value is $161.93/share; the Year 2019 value is $162.93/share; the Year 2020 value is $139.72/share; and the year 2021 value is $208.12:

Year 2022 estimate:

$228.58/share

Year 2023 estimate:

$251.06/share

Year 2024 estimate:

$271.45/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 4018.67 as this post is written

Standard & Poor’s S&P500 EPS Estimates 2022 – 2023 – May 12, 2022

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 of May 12, 2022:

Year 2022 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $224.39/share

-From a “bottom up” perspective, “as reported” earnings of $216.74/share

Year 2023 estimates add to the following:

-From a “bottom up” perspective, operating earnings of $248.07/share

-From a “bottom up” perspective, “as reported” earnings of $243.75/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 4012.32 as this post is written

Friday, May 13, 2022

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – May 13, 2022 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 Advisor Perspectives’ ECRI update post of May 13, 2022 titled “ECRI Weekly Leading Index Update.”  These charts are on a weekly basis as of the May 13, 2022 release, reflecting data through May 6, 2022.

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

ECRI WLI 156.2

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. .7 Percent

_________

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 3996.13 as this post is written 

Philadelphia Fed – 2nd Quarter 2022 Survey Of Professional Forecasters

The Philadelphia Fed 2nd Quarter 2022 Survey of Professional Forecasters was released on May 13, 2022.  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 2022:  2.5%

full-year 2023:  2.3%

full-year 2024:  2.0%

full-year 2025:  2.3%

Unemployment Rate: (annual average level)

for 2022: 3.6%

for 2023: 3.6%

for 2024: 3.8%

for 2025: 3.8%

Regarding the risk of a negative quarter in real GDP in any of the next few quarters, mean estimates are 19.6%, 19.7%, 22.2%, 28.2% and 25.5% for each of the quarters from Q2 2022 through Q2 2023, respectively.

As well, there are also a variety of time frames shown (present quarter through the year 2031) 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 2.2% to 7.1% range.

_____

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 4017.63 as this post is written

Stock Market Capitalization To GDP – Through Q4 2021

“Stock market capitalization to GDP” is a notable and important metric regarding stock market valuation.  In February of 2009 I wrote of it in “Does Warren Buffett’s Market Metric Still Apply?

On the Advisor Perspectives’ site there is an update depicting this “stock market capitalization to GDP” metric.

As seen in the May 11, 2022 post titled “Market Cap to GDP: April Buffett Valuation Indicator” two different versions are displayed, varying by the definition of stock market capitalization. (note:  additional explanation is provided in the post.)

For reference purposes, here is the first chart, with the stock market capitalization as defined by the Federal Reserve:

(click on charts to enlarge images)

Corporate Equities Market Cap To GDP

Here is the second chart, with the stock market capitalization as defined by the Wilshire 5000:

Wilshire 5000 market cap to GDP

As one can see in both measures depicted above, “stock market capitalization to GDP” continues to be at notably high levels from a long-term historical perspective.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 4012.50 as this post is written

Tuesday, May 10, 2022

Charts Indicating Economic Weakness – May 2022

 

U.S. Economic Indicators

Throughout this site there are many discussions of economic indicators.  This post is the latest in a series of posts indicating facets of U.S. economic weakness or a notably low growth rate.

The level and trend of economic growth is especially notable at this time. As seen in various measures and near-term projections, the U.S. economy had undergone an outsized level of economic contraction in 2020. However, most people believe (and virtually all prominent economic forecasts indicate) that this historic level of contraction will have proven ephemeral in nature; i.e. an economic expansion will continue. 

As seen in the April 2022 Wall Street Journal Economic Forecast Survey the consensus (average estimate) among various economists is for 2.57% GDP growth in 2022, 2.18% GDP growth in 2023, and 2.06% GDP growth in 2024.

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:

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Real Average Hourly Earnings

Various measures of (nominal) average hourly earnings continue to show significant growth. However, due to continuing high inflation, Real Average Hourly Earnings continues to shrink. Shown below is a chart of earnings measures as seen in The Economics Daily of April 19, 2022 titled “Real average hourly earnings down .8 percent from February to March 2022”:

Average hourly earnings and real average hourly earnings

As seen in this The Economics Daily:

Average hourly earnings increased 5.6 percent for the 12 months ended in March 2022 and 58.3 percent from March 2006 to March 2022. After adjusting for inflation, real average hourly earnings decreased 2.7 percent for the 12 months ended in March 2022 and increased 9.9 percent from March 2006 to March 2022.

source: Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, Real average hourly earnings down 0.8 percent from February to March 2022 at https://www.bls.gov/opub/ted/2022/real-average-hourly-earnings-down-0-8-percent-from-february-to-march-2022.htm (visited May 09, 2022)

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Advance Real Retail and Food Services Sales (RRSFS)

While the Advance Retail Sales: Retail Trade and Food Services (RSAFS) measure continues to advance, the trend when viewed from a “Real” (i.e. inflation-adjusted) basis appears (far) less robust.

Shown below is retail sales on a real basis [the Advance Real Retail and Food Services Sales (RRSFS) measure] with last value of $231,389 Million through March, last updated April 14, 2022:

Advance Real Retail and Food Services Sales

Displayed below is this same RRSFS measure on a “Percent Change From Year Ago” basis, which has now turned negative with a last value of -1.5%:

Advance Real Retail and Food Services Sales, Percent Change From Year Ago

source: Federal Reserve Bank of St. Louis, Advance Real Retail and Food Services Sales [RRSFS], retrieved from FRED, Federal Reserve Bank of St. Louis; May 9, 2022: https://fred.stlouisfed.org/series/RRSFS

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Real Disposable Personal Income (DSPIC96)

“Real Disposable Personal Income” (DSPIC96) has been volatile since 2020, and ongoing high inflation is presenting a hurdle to its continued growth. Shown below is this measure with last value of $15,308.50 through March, last updated April 29, 2022:

Real Disposable Personal Income

Below is this measure displayed on a “Percent Change” (from prior month) basis with last value of -.4%:

Real Disposable Personal Income Percent Change

Below is this measure displayed on a “Percent Change From Year Ago” basis with value -19.9%:

Real Disposable Personal Income Percent Change From Year Ago

Below is this same measure (“Percent Change From Year Ago” basis) but from the year 2000 onward:

Real Disposable Personal Income Percent Change From Year Ago

source: U.S. Bureau of Economic Analysis, Real Disposable Personal Income [DSPIC96], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed May 9, 2022: https://fred.stlouisfed.org/series/DSPIC96

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Motor Vehicle Retail Sales: Heavy Weight Trucks (HTRUCKSSA)

Sales of “Heavy Weight Trucks” (HTRUCKSSA) has recently been volatile. Shown below is this measure with last value of 38.889 Thousand through April 2022, last updated May 6, 2022:

Motor Vehicle Retail Sales:  Heavy Weight Trucks

Below is this measure displayed on a “Percent Change From Year Ago” basis with value -3.1%:

Motor Vehicle Retail Sales - Heavy Weight Trucks Percent Change From Year Ago

source: U.S. Bureau of Economic Analysis, Motor Vehicle Retail Sales: Heavy Weight Trucks [HTRUCKSSA], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed May 9, 2022: https://fred.stlouisfed.org/series/HTRUCKSSA

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Other Indicators

As mentioned previously, many other indicators discussed on this site indicate slow economic growth 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 3991.24 as this post is written