Coincident Economic Indicators

Viewed yr / yr, the recession deepend further. The Feb. index of
CEI was down 5.1% vs. 4.5% for Jan. All components softend. My
indicators are overstating the weakness somewhat because they do
not capture the large increase in the social security disbursement
rate. The real hourly wage remains a very strong 3.6%, which when
coupled with per capita real SS disbursement of over 5%, gives the
consumer the stongest per adult cash buying power in many years.
That remains the bright spot in the outlook.

Real per capita income growth is being undercut by the rising tide of
employment losses and a weakening job market will eventually lead to
a softening of wage rates. Short term, real retail sales is showing
stabilization, which is a hopeful sign. Seen yr/yr, real retail sales is
down about 9.9%, which continues to show how strongly consumers
are interested in boosting liquidity or savings. Short term, the
liquidity preference has weakened, and this is precisely what is needed
to restart the economy. Come April, wage earners will get another
boost from lower tax witholding rates.

Production fell a whopping 11.2% yr/yr through Feb. That means that
inventories are being liquidated relative to sales and that the pipeline
is thinning out. Weak production also reflects the dramatic decline of
US exports under way over the past half year or so.

In all, it remains premature to give up on the idea of a stronger Half 2
economy for 2009, although the outlook remains a cliffhanger.