About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Friday, October 08, 2010

Economic Indicators

The weekly coincident activity indicator has been on the flat side since Jul. (DJ-BTMU).

The weekly leading economic indicator sets have been improving since the end of Aug.
and suggests the US economy may experience a re-acceleration of growth in early 2011.
The monthly leading indicator for Sep. shows a continuing deceleration in the % of
companies experiencing new order flow. The downtrend has been in effect since Jun.
and has been as steep as  the May - Aug. decline in the weekly leading suggested it
would be. New order rates are wanly positive, not negative, and if the new uptrend in
the weekly leading indicators holds up, should improve before long.

The Global monthly leading index has yet to turn negative but it does show a marked
slowdown of growth since Apr. of this year. as the effects of fiscal stimulus programs
wind down. The loss of momentum in global growth underlies the recent development
of trade tensions as nations seek to shield domestic output from exports. These tensions
are "normal" in the wake of deep global recession and will require continuing
attention from G-20 and maturity from national leaders.

My profits indicators were strong in Jul. and Aug. but did show some evident
moderation in Sep. And so it may be that Q4 '10 profits may come along more modestly
as well.

The Economic Power Index has been improving steadily since the end of 2009.
However, at +1% yr / yr,  it is still too low to support more than low growth in
the current economic environment of reduced private sector credit demand. The
The real wage rate component of the index is still positive but has slowed sharply
from late 2009, as slack in the labor market keeps wage progress slow. The main
positive has been the steady improvement in civilian employment growth, which
registered the first positive yr / yr comparison in Sep. since early 2008. The total
index looks a little better if longer work week hours and overtime are added in.

There remains very sizable capital slack in the system. The rate of capacity
utilization is still below levels seen at the bottom of most recessions and total
employment is still dramatically below the prior cycle peak despite the addition
of 1.6 million jobs off the low point. Finally, the $ level of short term private
sector credit demand remains well below the prior peak and continues to
validate nominal short rates.

If you scroll down the DJ-BTMU link to the longer term chart, you can see that
although the US economy has made a partial "V" shaped recovery, it remains  a
long ways below the 2007 high of this index.

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