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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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  • The Economic Slowdown Shown In Freight Movements

    I always think of reporter who get caught in the news story and becoming the news. I watch freight movements to validate the economy - and one of the pulse points (sea container movements) actually triggering an economic slowdown. Labor issues (aka slowdowns) at West Coast ports have been going on for months - and peaked just as it was resolved earlier this month.

    The Port of Los Angeles finally issued its January data (almost a half month late), and allowing analysis of the traffic in the Ports of Los Angeles and Long Beach. The labor dispute's damage to the freight movements shows both exports and imports were down over 20% from one year ago. With $1 trillion dollars of movements through the West Coast Ports annually, this kind of strike will prove damaging to the economy.

    As this labor dispute is apparently resolved, I suspect a majority of the lost movements will be recovered in the coming months. The majority is not all:

    • some traffic went to other ports not affected by the dispute;
    • some perishables simply rotted;
    • some perishables were not shipped (and will never be shipped as they went elsewhere);
    • some items were sourced elsewhere.

    It will be months until container movements can be used as a gauge of the economy.

    Consider that imports final sales are added to GDP usually several months after import - while the import cost itself is subtracted from GDP in the month of import. Export final sales occur around the date of export. Container counts do not include bulk commodities such as oil or autos which are not shipped in containers. For this month:

     Acceleration Month-over-MonthChange from One Year AgoYear to Date vs. Previous Year3 Month Rolling Average vs. Average One Year AgoAcceleration 3 Month Rolling Average
    Imports-26.0%-26.0%-26.0%-9.4%-10.7%
    Exports-10.3%-21.8%-21.8%-15.9%-3.5%

    As the data is very noisy - the best way to look at this data is the 3 month rolling averages. There is a direct linkage between imports and USA economic activity - and the change in growth in imports foretells real change in economic growth. Export growth is an indicator of competitiveness and global economic growth.

    This deceleration of imports 3 month rolling average is not a positive sign for GDP as the year progresses.

    Unadjusted 3 Month Rolling Average for Container Counts Year-over-Year Change (comparing the 3 month average one year ago to the current 3 month average) - Ports of Los Angeles and Long Beach Combined - Imports (red line) and Exports (blue line)

    (click to enlarge)

    z container4.PNG

    There is reasonable correlation between the container counts and the US Censustrade data also being analyzed by Econintersect. But trade data lags several months after the more timely container counts.

    Unadjusted Year-over-Year Change in Container Counts - Ports of Los Angeles and Long Beach Combined - Imports (red line) and Exports (blue bars)

    (click to enlarge)

    This slowdown in sea container movements has affected rail also. Week 7 of 2015 shows same week total rail traffic (from same week one year ago) declined significantly according to the Association of American Railroads (NYSE:AAR) traffic data. Intermodal traffic, which accounts for half of movements, continued to contract year-over-year. Although it is assumed part of the intermodal decline was caused by labor issues at the West Coast Ports, and another part was caused by a large decline in coal production - it does not explain a good portion of the decline.

    The AAR contributed to this drop by defining week 1 of 2015 as week 53 of 2014 which put comparable weeks one off the correct week. Still it is hard to tell if the labor issues at the West Coast Ports, coal production decline, and the comparable week being off one week explains all the decline.

    The weekly data is fairly noisy, and the best way to view it is to look at the rolling averages which generally are in a general growth cycle.

     Percent current rolling average is larger than the rolling average of one year agoCurrent quantities accelerating or deceleratingCurrent rolling average accelerating or decelerating compared to the rolling average one year ago
    4 week rolling average0.5%deceleratingdecelerating
    13 week rolling average4.8%deceleratingaccelerating
    52 week rolling average5.0%deceleratingdecelerating

    So if you think the poor GDP numbers for 4Q2014 this week were bad - the dynamics for 1Q2015 are not looking good.

    Other Economic News this Week:

    The Econintersect Economic Index for March 2015 continues to show a decelerating but growing economy. All tracked sectors of the economy are expanding - but most sectors are showing some slowing in their rate of growth. The negative effects of the recently solved West Coast Port slowdown (a labor dispute which had been going on for months) can be seen be seen in much of the raw data - and it will be an economic drag on 1Q2015 GDP. Although beyond our forecast view, we expect a slight economic bounce in the coming months as a trillion dollars annually of cargo begins to traverse the West Coast Ports normally.

    The ECRI WLI growth index value crossed slightly into negative territory which implies the economy will not have grown six months from today.

    Current ECRI WLI Growth Index

    The market was expecting the weekly initial unemployment claims at 279,000 to 300,000 (consensus 290,000) vs the 313,000 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 283,000 (reported last week as 283,250) to 294,500. The rolling averages have been equal to or under 300,000 for the 23 of the previous 24 weeks.

    Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line), 2015 (violet line)

    (click to enlarge)

    Bankruptcies this Week: Sao Paulo, Brazil-based Aralco S/A Industria e Comercio and eight affiliated Debtors filed for Chapter 15

    Please view our landing page for all the economic and business news for this past week.

    Feb 28 7:34 AM | Link | Comment!
  • Positive News Continues From The Manufacturing Sector

    What is interesting to me is how GDP is measured in real dollars (inflation adjusted) - and the pundits continue to look at data releases in current dollars. Hello! - we are in a near deflationary situation and you have to look at things in inflation adjusted dollars.

    Two releases this week were immune from this "inflation" issue as they are based on counting things - residential building (which counts permits and construction completions) and industrial production (indexed production level). I like to look at rolling averages as the individual monthly data is not accurate when released - but averaging softens these errors.

    The headlines say seasonally adjusted Industrial Production (NYSE:IP) improved.Econintersect's analysis agrees - AND consider that the unadjusted rolling averages are continuing to accelerate. However, growth was weaker than expectations.

    • Headline seasonally adjusted Industrial Production (IP) increased 0.2% month-over-month and up 4.8% year-over-year.
    • Econintersect's analysis using the unadjusted data is that IP growthaccelerated 0.2% month-over-month, and is up 4.5% year-over-year.
    • The unadjusted year-over-year rate of growth accelerated 0.1% from last month using a three month rolling average, and is up 4.6% year-over-year.

    Unadjusted Industrial Production year-over-year growth for the past 12 months has been between 2% and 4% - it is currently 4.5%. It is interesting that the unadjusted data is giving a smooth trend line.

    Year-over-Year Change Total Industrial Production - Unadjusted (blue line) and the Unadjusted 3 month rolling average (red line)

    Residential building permits had a major backward revision this month that went back two years. Construction completions were less than permits which is positive for a change. As the data is noisy and with backward revisions, the rolling averages are the best metric to view this series - and the growth continues to decelerate.

    Unadjusted 3 Month Rolling Average of Year-over-Year Growth - Building Permit (blue line) and Construction Completions (red line)

    (click to enlarge)

    So we have one data series (industrial production) where the growth rate is accelerating, and another (residential building) where the opposite is occurring. My belief is that residential building sector continues to be dogged by a demographic shift in what defines a family unit, the overbuilt situation of homes - and the importance of owning one's own home.

    Other Economic News this Week:

    The Econintersect Economic Index for February 2015 continues to show a stable and growing economy - again with a modest decline in growth from last month. All portions of the economy outside our economic model - except residential housing - are showing reasonable expansion. The growth trend line for our model is decelerating, however, if we toss in a few more elements which we analyze (but do not include) in our economic forecast model (such as employment or consumer sentiment) - the trends are improving rather than slowing.

    The ECRI WLI growth index value being slightly into negative territory implies the economy will not have grown six months from today.

    Current ECRI WLI Growth Index

    The market was expecting the weekly initial unemployment claims at 270,000 to 305,000 (consensus 290,000) vs the 283,000 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 289,750 (reported last week as 289,750) to 283,250. The rolling averages have been equal to or under 300,000 for the 22 of the previous 23 weeks.

    Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line), 2015 (violet line)

    (click to enlarge)

    Bankruptcies this Week: Winland Ocean Shipping, Cayman Islands-based Caledonian Bank Limited (Chapter 15), Allen Systems Group

    Please visit [our new landing page] which is designed to give you a week's view of all the economic and financial releases in the past week,

    Feb 21 8:01 AM | Link | Comment!
  • What Happened To The Business Rate Of Growth

    Economies never move in a single speed - but the rate of growth will always continue to vary. The economy seems to be in a slow patch right now.

    Retail Sales for January

    Retail sales slumped according to US Census but within the lower range of expectations. Our analysis agrees that this was a weak month for retail sales - and it brings into question what consumer do with all the money saved by lower fuel prices. Overall the rolling averages are yielding a declining growth trend - there is too much noise in the monthly figures.

    Econintersect Analysis:

    • unadjusted sales rate of growth decelerated 1.9% month-over-month, and up 2.9% year-over-year.
    • unadjusted sales 3 month rolling year-over-year average growth decelerated 0.6% month-over-month to 3.6% 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)

    • unadjusted sales (but inflation adjusted) up 3.3% year-over-year
    • backward revisions were mixed but did make current month seem slightly weaker;
    • in the seasonally adjusted data - almost all areas were strong this month for retail sales growth, with only miscellaneous retailers and gasoline stations being the headwinds month-over-month.

    But consider even though sales growth was down, it still was within the range of the last 12 months.

    Business Sales for December

    Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales improved compared to the previous month, but the rolling averages declined. US Census says the opposite BUT as this series is moderately noisy - the real metric is the 3 month rolling averages - and that metric continues to decelerate and now is below the range seen in the last 18 months. Inventories are only slightly elevated.

    Econintersect Analysis:

    • unadjusted sales rate of growth accelerated 2.7% month-over-month, and up2.8% year-over-year
    • unadjusted sales (inflation adjusted) up 2.8% year-over-year
    • unadjusted sales three month rolling average compared to the rolling average 1 year ago decelerated 1.1% month-over-month, and is up 2.2% year-over-year.
    Unadjusted Business Sales - Unadjusted (blue line), Unadjusted but Inflation Adjusted (red line), and 3 month rolling Average (yellow line)

    (click to enlarge)

    • unadjusted business inventories growth decelerated 0.2% month-over-month (up 4.3% year-over-year with the three month rolling averages decelerating), and the inventory-to-sales ratio is 1.25 which is slightly above average for Decembers during non-recessionary periods.

    Here the trend has been down for six months - but the rate of growth remains above 2%.

    Takeaway?

    Next week, I will definitely analyze why the pundits were wrong about lower gasoline prices being beneficial to the USA economy.

    Other Economic News this Week:

    The Econintersect Economic Index for February 2015 continues to show a stable and growing economy - again with a modest decline in growth from last month. All portions of the economy outside our economic model - except residential housing - are showing reasonable expansion. The growth trend line for our model is decelerating, however, if we toss in a few more elements which we analyze (but do not include) in our economic forecast model (such as employment or consumer sentiment) - the trends are improving rather than slowing.

    The ECRI WLI growth index value crossed slightly into negative territory which implies the economy will not have grown six months from today.

    Current ECRI WLI Growth Index

    The market was expecting the weekly initial unemployment claims at 275,000 to 300,000 (consensus 288,000) vs the 304,000 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 293,000 (reported last week as 292,750) to 289,750. The rolling averages have been equal to or under 300,000 for the 21 of the previous 22 weeks.

    Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line), 2015 (violet line)

    (click to enlarge)

    Bankruptcies this Week: Altegrity (aka US Investigations Services), Wet Seal

    If you want to catch up on all the news and analysis from last week, our [redesigned landing page] provides a complete snapshot.

    Feb 14 7:47 AM | Link | Comment!
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