Economic Comment

Economic recovery in the US and globally has been mild, especially
when compared to the strong rebounds in the leading indicators,
factory orders, and the various weekly and monthly cyclical pressure
gauges I use. all these measures plunged after mid-2008 and did
rebound about as strongly through the end of April, this year. In
fact, my coincident indicators -- real wage and retail sales plus
industrial production and civilian employment -- are up but 3.2%
yr/yr through 4/10 and remain well below pre-recession peaks.
Not the strength here the leading indicators and pressure gauges
would suggest.

Given the mild recovery, the indicators should not have been so
strong. Interestingly, the BIG "V" of the indicators / gauges does
measure up very nicely with the behavior of the trade accounts
since mid - 2008. Total US trade (imports + exports) fell nearly
40% from mid- 2008 to the 4/09 trough, and has rebounded by
25% since. There is also a BIG "V" in US factory orders over the
same interval. Other major economies have also experienced
powerful swings in trade, but in all cases, exports are netted out
against imports in computing country GDPs so that the immense
swing in global trade is heavily muted when you view final
demand around the globe.

The rebound in US export sales since 4/09 has dwarfed the
recoveries in other major output categories. Thus one issue that
comes up is whether the recent weakness in the weekly pressure
gauges discussed in the Tues. post may reflect the start of
moderation in export sales. And when the recent sharp decline
of sensitive raw materials prices is factored in, it may be fair to
opine that the rebound in global trade is set to moderate.

A slowdown of export and import growth for the US likely would
not have nearly the impact on GDP overall that the current
weakness in the weekly leading indicators such as that of the ECRI
would suggest, although export sectors would clearly be affected.

I lay this suggestion out as a possible alternative to the "double dip"
scenarios now being widely circulated. And, I also suggest that
the volatility in the trade accounts globally may have added
substantially to the volatility of the various indicator sets.