Leading Economic -- Weekly
Both sets of weeklies were strong over the Jun. '12 - Feb. '13 period. The uptrends have
broken and both WLIs have turned flat since Feb. These indicators can be volatile, but
right now no acceleration of economic growth is indicated. Monthly new order data
from purchasing managers has followed a similar pattern.
Coincident Economic -- Monthly & Weekly
The monthly series from Economic Cycles Research (ECRI) shows good progress for
the economy over the second half of 2012, but has been flat since, indicating growth
acceleration has gone into eclipse. The weekly series shows ever so mild progress so
far this year (BOJ).
My Customized Coincident Economic Indicator
It follows others, but I use total civilian employment and real take home pay instead of
payroll and wage data. Measured yr/yr, the economy is performing well when the %
change is 3.0 or stronger (last seen in 2011). Currently my coincident indicator is up
but 1.2% yr/yr. This reading may be lower than others you see because I have factored
in the recent increase in the payroll tax from 4% back up to 6%. By my measure, the
basic economy is in a cyclical growth momentum downtrend dating back to Feb. 2011,
when the indicator posted a strong 3.8% reading. The main problem areas continue to
be slow employment growth and a progressive deceleration of real take home pay
into negative territory. This is a very dreary economy.
S&P 500 12 mo. net per share is running close to $99.00 going into May. April was a
weak month for profits yr/yr as both volume growth and pricing power were low.
Margins may have also been clipped for industrial companies as the price / wage
measure was unfavorable.
There will needs be a considerable acceleration of top line growth ahead to move S&P
net per share off and up from the $100 annual level now in evidence. Many players are
confident that nearly global QE from the world's central banks will result in stronger
global economic progress. Not quite yet, but devoutly to be wished for.
- Peter Richardson
- 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 !!!