10-Year Treasury Yields – Two Long-Term Charts As Of May 16, 2016

On Friday (May 13, 2016) the yield on the 10-Year Treasury closed at 1.705%.

As a reference, here 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)

Here is a long-term chart of the 10-Year Treasury yield since 2008, depicted on a daily basis, LOG scale:

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2046.61 as this post is written

Markets During Periods Of Federal Reserve Intervention – May 13, 2016 Update

In the August 9, 2011 post (“QE3 – Various Thoughts“) I posted a chart that depicted the movements of the S&P500, 10-Year Treasury Yield and the Fed Funds rate spanning the periods of various Federal Reserve interventions since 2007.

For reference purposes, here is an updated chart (through May 13, 2016) from Doug Short’s blog post of May 13 (“Treasury Snapshot:  Approaching Five Months Since The Fed's December Rate Hike“):

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2046.61 as this post is written

Philadelphia Fed – 2nd Quarter 2016 Survey Of Professional Forecasters

The Philadelphia Fed 2nd Quarter 2016 Survey of Professional Forecasters was released on May 13, 2016.  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 2016:  1.7%

full-year 2017:  2.4%

full-year 2018:  2.4%

full-year 2019:  2.2%

Unemployment Rate: (annual average level)

for 2016: 4.8%

for 2017: 4.6%

for 2018: 4.6%

for 2019: 4.6%

–

Regarding the risk of a negative quarter in real GDP in any of the next few quarters, mean estimates are 12.5%, 14.6%, 15.9%, 17.4% and 18.5% for each of the quarters from Q2 2016 through Q2 2017, respectively.

As well, there are also a variety of time frames shown (present quarter through the year 2025) 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 1.3% to 2.3% range.

_____

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 2046.61 as this post is written

Long-Term Charts Of The ECRI WLI & ECRI WLI, Gr. – May 13, 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 May 13, 2016 titled “ECRI Weekly Leading Index:  WLI Down Slightly, YoY at 1.01%.”  These charts are on a weekly basis through the May 13, 2016 release, indicating data through May 6, 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 2045.20 as this post is written

The May 2016 Wall Street Journal Economic Forecast Survey

The May 2016 Wall Street Journal Economic Forecast Survey was published on May 12, 2016.  The headline is “WSJ Survey:  Economists Divided Over Next Fed Rate Increase.”  As indicated in the article, 70 economists were surveyed, although not every economist answered every question.

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:

The sudden drop-off in expectations of a June move followed a bumpy few weeks for the U.S. economy. In April, the Commerce Department reported output rose in the first quarter at a seasonally adjusted annual rate of 0.5%, the weakest reading in two years. Employers also pulled back in April, adding 160,000 jobs, down from 208,000 in March and 233,000 in February, the Labor Department reported.

As seen in the “Recession Probability” section, the average response as to the odds of another recession starting within the next 12 months was 19.61%; the average response in April’s survey was 19.03%.  The individual estimates, of those who responded, ranged from 1% to 60%.

–

The current average forecasts among economists polled include the following:

GDP:

full-year 2016:  1.9%

full-year 2017:  2.2%

full-year 2018:  2.2%

Unemployment Rate:

December 2016: 4.7%

December 2017: 4.6%

December 2018: 4.7%

10-Year Treasury Yield:

December 2016: 2.24%

December 2017: 2.74%

December 2018: 3.20%

CPI:

December 2016:  1.7%

December 2017:  2.2%

December 2018:  2.3%

Crude Oil  ($ per bbl):

for 12/31/2016: $45.23

for 12/31/2017: $50.67

(note: I highlight this WSJ Economic Forecast survey each month; commentary on past surveys can be found under the “Economic Forecasts” category)

_____

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 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 2058.72 as post is written

Long-Term Credit Spread Chart – May 12, 2016

In the October 6, 2015 post (“Comparisons Of Economic And Financial Aspects – 2008 And 2015“) I discussed credit spreads and featured a chart of the spread between Moody’s Seasoned Baa Corporate Bond and the 10-Year Treasury Constant Maturity.

For reference, here is an updated long-term chart of that measure, with a current reading (updated as of May 11, with a value from May 10, 2016) of 2.89%:

Federal Reserve Bank of St. Louis, Moody’s Seasoned Baa Corporate Bond Yield Relative to Yield on 10-Year Treasury Constant Maturity [BAA10Y], retrieved from FRED, Federal Reserve Bank of St. Louis on May 12, 2016:

https://research.stlouisfed.org/fred2/series/BAA10Y/

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2064.46 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 May 5, 2016 update (reflecting data through April 29) is -.952.

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 11, 2016 incorporating data from January 5,1973 to May 6, 2016, on a weekly basis.  The May 6, 2016 value is -.64:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 11, 2016:

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

–

The ANFCI chart below was last updated on May 11, 2016 incorporating data from January 5,1973 to May 6, 2016, on a weekly basis.  The May 6 value is .35:

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed May 11, 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 2070.32 as this post is written

Charts Indicating Economic Weakness - May 10, 2016

Throughout this site there are many charts of economic indicators.  At this time, the readings of these various indicators are especially notable.  While many are still indicating economic growth, others depict (or imply) various degrees of economic weakness.  Perhaps most prominent among those indicating economic growth is the First Quarter 2016 "Advance Estimate" of GDP (pdf) at 0.5%.

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each.

Manufacturing

As depicted by this chart showing various Federal Reserve Regional Manufacturing Indexes, there has been weakness in the recent readings:

source: Doug Short’s post of April 29, 2016, “Regional Fed Overview:  April Still Negative, but Continuing to Decline.”

comment:  

Various manufacturing statistics have recently been showing weakness.  This is seen in many metrics, including the various Federal Reserve regional manufacturing surveys.

Other aspect of manufacturing trends, as seen in various indicators, include the Value of Manufacturers' New Orders for Consumer Goods Industries, last updated May 4, 2016:

source:  US. Bureau of the Census, Value of Manufacturers' New Orders for Consumer Goods Industries [ACOGNO], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed May 8, 2016:

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

Here is the same measure on a "Percent Change From Year Ago" basis:

An additional concern is the seemingly (very) high levels of inventory, as seen in various measures, such as Total Business:  Inventories to Sales Ratio, last updated April 13, 2016:

Source:  US. Bureau of the Census, Total Business: Inventories to Sales Ratio [ISRATIO], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed May 9, 2016:

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

__

Employment

Labor Force Participation Rate (last updated 5-6-16; value of 62.8%):

source:  US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [CIVPART], retrieved from FRED, Federal Reserve Bank of St. Louis; accessed May 9, 2016:

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

comment:

I have written extensively concerning unemployment, as the current and future unemployment issue is of tremendous importance.

The consensus belief is that employment is robust, citing total nonfarm payroll growth and the current unemployment rate of 5.0%.  However, my analyses indicate that the consensus interpretation of both of these metrics and the conclusion that employment is strong is incorrect.  Of particular note is the unemployment rate, which 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, including that of the Labor Force Participation Rate shown above, 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 progress in an economic and societal manner.

While I don't believe that the Federal Reserve's Labor Market Conditions Index (LMCI) is an accurate portrayal of the overall employment situation, it is notable in that, as opposed to the Unemployment Rate and Total Nonfarm Payrolls statistics, it appears to be indicating weakness. The LMCI is described as being "derived from a dynamic factor model that extracts the primary common variation from 19, seasonally-adjusted, labor market indicators."  A reference document is seen in the May 22, 2014 document titled "Assessing the Change in Labor Market Conditions."

The latest update (as of May 9, 2016) is seen below:

source:  Board of Governors of the Federal Reserve System (US), Change in Labor Market Conditions Index [FRBLMCI], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed May 9, 2016:

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

__

Inflation Trends

The below chart shows inflation, as depicted by the PCE Price Index:

source: Doug Short’s April 29, 2016 PCE Update

comment:

As depicted above, the shortfall between the Federal Reserve’s stated inflation target (2% on the PCE Price Index) and the actual inflation reading continues.  The level of current inflation and the possibility of deflation is a vastly complex topic, and as such isn’t suitably discussed in a brief manner.  I have discussed the issue of deflation extensively as I continue to believe that outright sustained deflation will occur.  As I have stated in past commentaries, I don't believe that surveys or "market-based" measures concerning deflation will provide adequate "advance warning" of impending deflation.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2071.84 as this post is written