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Steven Hansen
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Steven Hansen is an international business and industrial consultant specializing in turning around troubled business units; consults to governments to optimize process flows; and provides economic indicator analysis based on unadjusted data and process limitations.
My company:
Econintersect LLC
My blog:
Global Economic Intersect
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  • Soft Retail Sales - What Gives?

    This week the markets did not like the soft retail sales number for July 2014. My opinion is that retail sales have been soft since the end of 2Q2012, and that the rate of growth remains at mid-range in the channel seen since 2Q2012.

    Econintersect Analysis:

    • unadjusted sales rate of growth decelerated 0.1% month-over-month, but up 4.2% year-over-year.
    • unadjusted sales 3 month rolling year-over-year average growth decelerated 0.4% month-over-month to 4.5% year-over-year.
    Advance Retail Sales Year-over-Year Change - Unadjusted (blue line), Unadjusted with Inflation Adjustment (red line), and 3 Month Rolling Average of Unadjusted (yellow line)

    (click to enlarge)

    • unadjusted sales (but inflation adjusted) up 2.5% year-over-year
    • backward revisions were very small;
    • big box retail stores were the big headwind this month for retail sales growth (with some contraction in auto sales), with most other areas expanding slightly month-over-month.

    U.S. Census Headlines:

    • seasonally adjusted sales unchanged month-over-month, up 3.7% year-over-year
    • the market was expecting:

     

    seasonally adjustedConsensus RangeConsensusActual
    Retail Sales - M/M change-0.1 % to 0.4 %0.2%0.0%
    Retail Sales less autos - M/M change0.1 % to 0.5 %0.4%0.1%
    Less Autos & Gas - M/M Change0.2 % to 0.7 %0.3%0.1%

     

    Year-over-Year Change - Unadjusted Retail Sales (blue line) and Inflation Adjusted Retail Sales (red line)

    Retail sales per capita seems to be in a long term downtrend (but short term trends vary depending on periods selected - see graph below).

    Year-over-Year Change - Per Capita Seasonally Adjusted Retail Sales

    Part of the problem is the US Census methodology in seasonal adjustments (we do an independent analysis using unadjusted data) - but it is evident that the per capita retail sales have been declining (see above chart). It should be obvious that the median consumer has less money to spend, and an improvement in retail sales is not around the corner.

    Other Economic News This Week

    The Econintersect Economic Index for August 2014 is showing our index at a 3 year high. Outside of our economic forecast - we are worried about the consumers' ability to expand consumption although data is now showing consumer income and expenditures growth are similar. The GDP expansion of 4% in 2Q2014 is overstated as 2.1% of the growth would be making up for the contraction in 1Q2014, and 1.7% of the growth is due to an inventory build.

    The ECRI WLI growth index value has been weakly in positive territory for almost two years. The index is indicating the economy six month from today will be slightly better than it is today.

    Current ECRI WLI Growth Index

    The market was expecting the weekly initial unemployment claims at 295,000 to 300,000 (consensus 295,000) vs the 311,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 293,750 (reported last week as 293,500) to 295,750.

    Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line)

    (click to enlarge)

    Bankruptcies this Week: None

    For a complete view of analysis and opinion this week - [click here to view]

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Aug 16 8:05 AM | Link | Comment!
  • Trade Data Says Economy Is Improving

    Import goods growth has positive implications historically to the economy - and the US Census produced seasonally adjusted goods and services imports were reported down month-over-month. Our analysis shows unadjusted goods (not including services) growth acceleration of 4.9% month-over-month (unadjusted data). The rate of growth 3 month trend is accelerating. You can see the correlation in the graph below:

    (click to enlarge)

    Look at the red line in the graph below.

    Inflation Adjusted But Not Seasonally Adjusted Year-over-Year 3 Month Rolling Average - Goods Export (blue line) and Goods Import Excluding Oil (red line)

    (click to enlarge)

    Exports remain weak because the world's economy continues to hurt.

    Other Economic News this Week:

    The Econintersect Economic Index for August 2014 is showing our index at a 3 year high. Outside of our economic forecast - we are worried about the consumers' ability to expand consumption although data is now showing consumer income and expenditures growth are similar. The GDP expansion of 4% in 2Q2014 is overstated as 2.1% of the growth would be making up for the contraction in 1Q2014, and 1.7% of the growth is due to an inventory build.

    The ECRI WLI growth index value has been weakly in positive territory for many months - but now in a noticeable improvement trend. The index is indicating the economy six month from today will be slightly better than it is today.

    Current ECRI WLI Growth Index

    The market was expecting the weekly initial unemployment claims at 295,000 to 315,000 (consensus 305,000) vs the 289,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 297,500 (reported last week as 297,250) to 293,500.

    Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line)

    (click to enlarge)

    Bankruptcies this Week: Privately-held Entegra Power Group, Eagle Bulk Shipping

    Please [click here] to view our analysis of events this week.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: economy, trade
    Aug 09 8:14 AM | Link | Comment!
  • 4% GDP Growth Is Not Really That Good, But The Jobs Report Really Was Good

    The advance estimate of second quarter 2014 Real Gross Domestic Product (NYSE:GDP) is a positive 4.0%.

    • The market expected GDP at +2.3% to 4.0% (consensus 3.1%).
    • 1Q2014 GDP was just revised from a negative 2.9% to negative 2.1% - an unusual revision.
    • There are significant "buts" relative to this advance GDP estimate.

    Before you believe the economy is taking off like a rocket, one must consider:

    • This advance estimate is based on source data that are incomplete or subject to further revision. (See caveats below.) Please note that historically advance estimates have turned out to be little more than wild guesses.
    • Headline GDP is calculated by annualizing one quarter's data against the previous quarters data (and the previous quarter was terrible in this instance). A better method would be to look at growth compared to the same quarter one year ago. For 2Q2014, the year-over-year growth is 2.4% - up from 1Q2014's 1.9% year-over-year growth. So one might say that GDP accelerated 0.6% from the first quarter.
    • 1.7% (over 40% of GDP growth) was attributable to inventory gain.
    Real GDP Expressed As Year-over-Year Change

    (click to enlarge)

    You can read more on GDP [here].

    We also published our August 2014 Economic Forecast continues to show a stable and growing economy - this general strengthening cycle began a year ago with one small dip at the beginning of 2014. Now our Economic Forecast Index is at a 3 year high. All portions of the economy outside our economic model - except housing - are showing expansion.

    The July 2014 BLS jobs report headlines again were fairly strong - although slightly less good than the previous month. Our unadjusted analysis paints a stronger picture of job growth this month. Non-seasonally adjusted non-farm payrolls rose 127,000 - the strongest July this century.

    Historical Unadjusted Private Non-Farm Jobs Growth Between Junes and Julys (Table B-1, data in thousands) - unadjusted (blue line) vs seasonally adjusted (red line)

    Other Economic News this Week:

    The ECRI WLI growth index value has been weakly in positive territory for many months - but now in a noticeable improvement trend. The index is indicating the economy six month from today will be slightly better than it is today.

    Current ECRI WLI Growth Index

    The market was expecting the weekly initial unemployment claims at 295,000 to 320,000 (consensus 305,000) vs the 302,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 300,750 (reported last week as 302,000) to 297,250.

    Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line)

    (click to enlarge)

    Bankruptcies this Week: Ambient, United Kingdom-based New World Resources, United Kingdom-based Zodiac Pool Solutions

    Please visit econintersect.com to view all of our analysis this week.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: economy, jpbs, gdp
    Aug 02 8:14 AM | Link | 1 Comment
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