Economic Indicators

Coincident Indicators
There was improvement in this data set for Nov. on better real retail sales, industrial
production and a reduction of pressure on the real wage reflecting weaker fuels prices.
Measured yr/yr, the coincidents rose by a combined 1.6% compared to +1.2% for Oct.
Moderate growth is signaled at +3.0%, so economic momentum remains subdued.

One issue to check closely going forward is the ratio of inventory to sales for business
which has jumped through Oct., indicating an imbalance between sales and production.
The build up of inventories to sales is the largest since early 2010, but is not yet critical.
Business I/S (Scroll down a little bit.)

Corporate Profits Indicators
My sales growth measures are running about +3 - 4% yr/yr. Volume growth has eased and
pricing power has come down substantially over the past 15 months. There has been an erosion
of profit margins outside of the financial sector as the premium of selling price over costs
has nearly evaporated. Banking sector earnings  and the profit margin are strong as a reduced
loan loss reserve continues to add to profitability and book ROE%. Corporate profits have
flattened out.

Inflation Potential
My primary inflation thrust indicator fell sharply from mid - 2011 through mid - 2012. Over
this same period, the 12 month CPI dropped from 4.0% to a low of 1.6%. Inflation has
picked  up modestly over the latter half of this year measured yr/yr, but the thrust indicator
remains quiet for now.

Next year could be a different story. There will be QE 4. China, the major buyer of commodities,
could well move back to faster growth. Finally, I expect the US to return to pressuring Iran to
give up on weaponizing its nuclear materials. Wholesale Gasoline Spot Price