Economic Indicators

Weekly & Monthly Leading
Both weekly and monthly lead indicators continued to improve in
9/09, and both continue to point to a "V" shaped economic recovery.
The weeklies did lose some momentum over the month, so we will
have to keep an eye on that.

Coincident Indicators
Data is available through August. With real retail sales and industrial
production rising over the first 2 months of the quarter, it is likely
the coincident sets have stabilized. Measured yr / yr, momentum
has improved from -6% readings to -3%.

Corporate Profits indicators
My profits indicators have improved dramatically since early ' 09.
The number of companies reporting rising output has risen sharply
over Q 3 ' 08, but actual output levels, although rising in recent
months still trail prior year levels. Pricing power has remained
weak, but operating costs have been slashed. Viewed sequentially,
quarterly profits are rising from low levels as earnings power
recovers, and this positive trend is the more critical factor. The
"buzz" on The Street has it that Q 3 profits will top estimates.
Right now, annualized SP 500 net per share is probably running $60.

Economic Power Index
This simple index has turned negative. Yr / yr real individual wage
growth has decelerated, but remains historically strong. But,
this crucial positive has now been eclipsed by the deterioration of
total civilian employment when measured yr/ yr. Thus for now,
tax cuts, automatic policy stabilizers and a growing flow of fiscal
spending $ have to carry the day. The key here will be how quickly
negative job loss momentum reverses in the wake of improved
spending and production. This transition period is anxiety provoking
not only because of the weak job market, but also because the
consumer has been adding to liquidity by boosting savings and
paying down revolving credit. The plus side here is that the
underlying demand for consumers is strong following nearly 2
years of marked retrenchment.

Most economists are not sanguine on the employment outlook. And
it is tempting to just go along with this view. But, since business
slashed costs so sharply as the recession took hold, I think it only
prudent to see if higher demand might bring people back on to
payrolls at a faster clip than expected. Companies do not like to
blow orders because they are short handed. Good way to lose
market share, that.

Global Indicators
Output on a global basis appears to have turned positive over the
summer and might be slighly ahead of the US, except for new
orders where the breadth of companies with a rising book has been
quite strong. Employment and pricing power remain subdued on a
global basis, in tandem with the US.