For reference, below is a chart of the St. Louis Fed Price Pressures Measures – Deflation Probability [FRED STLPPMDEF] through October 2022.
While I do not necessarily agree with the current readings of the measure, I view this as a proxy of U.S. deflation probability.
A description of this measure, as seen in FRED:
This series measures the probability that the personal consumption expenditures price index (PCEPI) inflation rate (12-month changes) over the next 12 months will fall below zero.
The chart, on a monthly basis from January 1990 – October 2022, with a last reading of .00026, last updated on October 28, 2022:
Here is this same U.S. deflation probability measure since 2008:
source: Federal Reserve Bank of St. Louis, Deflation Probability [STLPPMDEF], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed October 28, 2022: https://fred.stlouisfed.org/series/STLPPMDEF
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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.
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The Special Note summarizes my overall thoughts about our economic situation
Advisor Perspectives had a post of October 28, 2022 (“Michigan Consumer Sentiment Inches Up in October“) 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 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.
Compensation costs for civilian workers increased 1.2 percent, seasonally adjusted, for the 3-month period ending in September 2022, the U.S. Bureau of Labor Statistics reported today. Wages and salaries increased 1.3 percent and benefit costs increased 1.0 percent from June 2022. (See tables A, 1, 2, and 3.)
also:
Compensation costs for civilian workers increased 5.0 percent for the 12-month period ending in September 2022 and increased 3.7 percent in September 2021. Wages and salaries increased 5.1 percent for the 12-month period ending in September 2022 and increased 4.2 percent for the 12-month period ending in September 2021. Benefit costs increased 4.9 percent over the year and increased 2.5 percent for the 12-month period ending in September 2021. (See tables A, 4, 8, and 12.)
Below are three charts, updated on October 28, 2022 that depict various aspects of the ECI, which is seasonally adjusted (SA):
The first depicts the ECI, with a value of 154.0:
source: US. Bureau of Labor Statistics, Employment Cost Index: Total compensation: All Civilian [ECIALLCIV], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed October 28, 2022: https://research.stlouisfed.org/fred2/series/ECIALLCIV/
The second chart depicts the ECI on a “Percent Change from Year Ago” basis, with a value of 5.0%:
The third chart depicts the ECI on a “Percent Change” (from last quarter) basis, with a value of 1.2%:
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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
Each month I have been highlighting various estimates of U.S. recession probabilities. The latest update was that of October 21, 2022, titled “Recession Probability Models – October 2022.”
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.
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
All charts reflect quarterly data through the 3rd quarter of 2022, and were last updated as of October 27, 2022.
Velocity of M1 Money Stock, current value = 1.256:
Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed October 27, 2022: http://research.stlouisfed.org/fred2/series/M1V
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Velocity of M2 Money Stock, current value = 1.189:
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
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
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 September 2022, updated on October 27, 2022. This value is $274,717 ($ Millions):
(click on charts to enlarge images)
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Second, here is the chart depicting this measure on a “Percent Change from a Year Ago” basis, with a last value of 11.3%:
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 October 27, 2022; http://research.stlouisfed.org/fred2/series/DGORDER
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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
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 October 25, 2022 depicting data through September 2022, with a value of $20,283.5 Billion:
Here is the “M1 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 2.1%:
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 October 25, 2022: 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 October 25, 2022, depicting data through September 2022, with a value of $21,503.4 Billion:
Here is the “M2 Money Stock” chart on a “Percent Change From Year Ago” basis, with a current value of 2.6%:
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 October 25, 2022: https://fred.stlouisfed.org/series/M2SL
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The Special Note summarizes my overall thoughts about our economic situation
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:
source: Federal Reserve Bank of Chicago, Chicago Fed National Activity Index [CFNAI], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed October 24, 2022: https://fred.stlouisfed.org/series/CFNAI
The CFNAI-MA3, with a current reading of .17:
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 October 24, 2022: https://fred.stlouisfed.org/series/CFNAIMA3
The ADS Index as of October 20, 2022, reflecting data from March 1, 1960 through October 15, 2022, with last value .117281:
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The Conference Board Leading Economic Index (LEI), Coincident Economic Index (CEI), and Lagging Economic Index (LAG):
As per the October 20, 2022 Conference Board press release the LEI was 115.9 in September, the CEI was 108.9 in September, and the LAG was 116.2 in September.
An excerpt from the release:
“The US LEI fell again in September and its persistent downward trajectory in recent months suggests a recession is increasingly likely before yearend,” said Ataman Ozyildirim, Senior Director, Economics, at The Conference Board. “The six-month growth rate of the LEI fell deeper into negative territory in September, and weaknesses among the leading indicators were widespread. Amid high inflation, slowing labor markets, rising interest rates, and tighter credit conditions, The Conference Board forecasts real GDP growth will be 1.5 percent year-over-year in 2022, before slowing further in the first half of next year.”
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
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:
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 October 21, 2022, with a last value of 31,082.56):
(click on chart to enlarge image)(chart courtesy of StockCharts.com)
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The Special Note summarizes my overall thoughts about our economic situation
