Coincident Economic Indicators

The CEI data sets I follow posted a small increase form the preceding
month in July, for the first month on month increase in the past 14.
So, the US economy appears to have expanded modestly in July.
On my indicators, the growth reflects a 0.1% increase in real retail
sales plus a 0.5% positive in industrial production.

This increase in activity came right on time relative to the turn in the
leading indicators. However, I would have to say that the gain in
inflation adjusted retail sales was quite low, and we are going to have
to see the pace of recovery in sales pick up markedly in the months
ahead if the US economy is to have anywhere near a normal first year
of recovery.

In passing, I would note that both US exports and imports did gain
in June (latest month available).

Measured yr/yr, the coincident indicators declined by more than
6%, reflecting deep declines in real retail sales and production. The
one bright spot remains the change in the real wage, which reached a
record high 4.6% for the 12 months through July. In past recoveries
a large positive change in the real wage of this magnitude would likely
have triggered much stronger consumer spending. But with the
depth of the recession coupled with large losses in home values and
equities portfolios, folks have skewed activity toward building savings
and paying down all manner of revolving credit. The balance needs
to tilt away from emphasis on liquidity and more toward spending
if there is to be a recovery worthy of the name.

I would note that the momentum of job losses is declining rapidly,
and more level sales and production could continue this sharp reversal
in job losses, as companies did make dramatic cuts to employment
and will not want to blow orders because they are short on people.

But, bottom line, I would chalk up July as a month favoring those
who are the more conservative regarding the economy, and this on
the basis of scant progress in real retail sales.