Leading Economic Indicators
The weekly measures I follow accelerated up from mid - 2012 through mid - 2013. There
were dips around Hurricane Sandy (It destroyed over $40 bil. of the US capital stock) and
the timetable to see an acceleration of economic growth may also have been disrupted by
the put - back of the 2% of the payroll tax and US gov't. sequestration programs, but we
did finally see much stronger PMI data in recent months plus mild pick-ups in retail sales,
payroll employment and industrial production. More lately though, the weekly leading
data have flattened out disappointingly and thus suggest a slower period for the economy
not too far down the road.
Coincident Economic Indicator
Measured yr/yr, my coincident indicator has improved slightly, but at +1.5% is still only half
the +3.0% yr/yr reading that would signal solid, balanced expansion. The slow pace for this
indicator continues to reflect sluggish employment growth and a - 0.9% reading for real take
home pay. Looking ahead, the effects of the payroll tax increase of Jan. this year should
continue to dissipate and the real wage before taxes may creep a bit higher with very low
Corporate Profits Monitors
My macro measure for US business sales has picked up modestly in recent months to about
4.3% yr/yr. Volume growth has accelerated, but pricing power remains very subdued not just
in the US but globally. The pricing / cost measure remains mildly unfavorable which
suggests continuing pressure on operating profit margins. As well, productivity has dipped
slightly in recent months. The large US export sales sector is up but 2.7% over the past 18
months and this remains a major factor behind slower earnings growth momentum in recent
years. Large share buy back programs continue to inflate reported SP 500 profits.
The current strong liquidity cycle, buttressed by the Fed's QE 3 program, should be good
enough to see my top line growth measure for business sales accelerate to about 6.5% on
a 12 months basis. The business sector has done a little better recently, but is still well
under the pace needed to restore stronger operating earnings growth.
- 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 !!!