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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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  • Durable Goods Says The Economy Is Doing Quite Well

    The headlines say the durable goods new orders declined in August. This was all because July's spike in aircraft orders distorting the month-to-month evaluation. If you exclude civilian aircraft, durable goods were up month-over-month.

    Further, durable goods is growing over three times as fast as GDP when you compare growth on a year-over-year basis. The only negative is that the Federal Reserve's Durable Goods Industrial Production Index declined in August throwing some doubt on the validity of the data - however this is a slightly different pulse point that correlates over time (and not necessarily in a single month)..

    Econintersect Analysis:

    • unadjusted new orders growth decelerated 29.7% ( after accelerating 34.2% the previous month) month-over-month , and is up 7.4% year-over-year.
    • the three month rolling average for unadjusted new orders accelerated 2.1% month-over-month, and up 15.8% year-over-year.
    Year-over-Year Change of 3 Month Rolling Average - Unadjusted (blue line) and Inflation Adjusted (red line)

    (click to enlarge)

    • Inflation adjusted but otherwise unadjusted new orders are up 7.1% year-over-year.
    • The Federal Reserve's Durable Goods Industrial Production Index growth decelerated 4.4% month-over-month, up 5.3% year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is decelerating.
    Comparing Seasonally Adjusted Durable Goods Shipments (blue line) to Industrial Production Durable Goods (red line)

    • unadjusted backlog (unfilled orders) growth accelerated 0.7% month-over-month, up 13.1% year-over-year.
    • according to the seasonally adjusted data, civilian aircraft new orders was the major headwind month-over-month after growing 318% last month. Computer related products were also weak. Most other areas grew moderately month-over-month.
    • note this is labelled as an advance report - however, backward revisions historically are relatively slight.

    Census Headlines:

    • new orders down 18.2% (after growing 22.6% the previous month) month-over-month.
    • backlog (unfilled orders) was up 0.6% month-over-month - and remains at a historical high.
    • the market expected:
     Consensus RangeConsensusActual
    New Orders - M/M change-20.0 % to 3.5 %-17.1%-18.2%
    Ex-transportation - M/M0.2 % to 2.0 %0.8%0.7 %

    Durable Goods sector is the portion of the economy which provides products which have a utility over long periods of time before needing repurchase - like cars, refrigerators and planes.

    Econintersect concentrates on new orders as it is the entry point for future production - and somewhat intuitive economically. Using this pulse point, the economy is doing fairly well.

    Other Economic News this Week:

    The Econintersect Economic Index for September 2014 is showing our index declined from last months 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 is now growing faster than expenditures growth. The GDP expansion of 4.2% in 2Q2014 is overstated as 2.1% of the growth would be making up for the contraction in 1Q2014, and 1.4% of the growth is due to an inventory build. Still, there are no warning signs that the economy is stalling.

    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 299,000 to 310,000 (consensus 300,000) vs the 293,000 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 299,750 (reported last week as 299,500) to 298,500.

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

    (click to enlarge)

    /images/z unemployment.PNG

    Bankruptcies this Week: Privately-held ITR Concession Company, ISC8 (fka Irvine Sensors Corporation), Vision Industries

    [click on image below to view all the 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.

    Sep 27 10:25 AM | Link | 3 Comments
  • Just Trying To Balance Out The Overly Positive USA Economic Hype

    I am NOT negative on the economy. There are NO warning signs of a stumbling economy - but I see a relatively soft economy in the future. There are many signs of softness, including a relatively weak industrial production. However, there were no indications of economic deceleration in this report as the growth remained in the narrow bands we have been seeing for some time.

    The Econintersect Economic Index for September 2014 is showing our index declined from last months 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 is now growing faster than expenditures growth. The GDP expansion of 4.2% in 2Q2014 is overstated as 2.1% of the growth would be making up for the contraction in 1Q2014, and 1.4% of the growth is due to an inventory build. Still, there are no warning signs that the economy is stalling.

    There were two forward leading indicators released this week.

    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 Conference Board Leading Economic Index (NYSEMKT:LEI) for the U.S. improved in August to 103.8 (2004 = 100, previous month originally published reading = 103.3). The index growth has been noisy but remains in a growth trend.

    This index is designed to forecast the economy six months in advance. The market expected growth of 0.4% to 0.8% (consensus 0.6%) in the LEI (versus the 0.9% reported).

    Both the LEI and ECRI's WLI are forecasting growth for the next six months.

    Additional comments from the economists at The Conference Board add context to the index's behavior.

    The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.2 percent in August to 103.8 (2004 = 100), following a 1.1 percent increase in July, and a 0.7 percent increase in June.

    "The LEI continued to rise in August, although at a slower rate than in July," said Ataman Ozyildirim, Economist at The Conference Board. "The LEI's six-month growth trend has been held back slightly by lackluster contributions from housing permits and new orders for nondefense capital orders. Despite concerns about investment picking up, the economy should continue expanding at a moderate pace for the remainder of the year."

    "The leading indicators point to an economy that is continuing to gain traction, but most likely won't repeat its stellar second quarter performance in the second half," said Ken Goldstein, Economist at The Conference Board. "Meanwhile, the CEI, a measure of current economic activity, continued to expand through August, amid improving personal income, employment and retail sales. However, industrial production registered a slight decrease for the first time in seven months."

    The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.2 percent in August to 109.7 (2004 = 100), following a 0.1 percent increase in July, and a 0.3 percent increase in June.

    The LEI which shows the index at levels below the pre-2007 recession - as well as showing some turbulence in the indicator's post recession climb:

    (click to enlarge)

    The question on the table is whether is actually is important to the average American. Of course there are correlations between jobs and economic activity. However, this correlation is not as strong as it has been historically.

    Other Economic News

    The market was expecting the weekly initial unemployment claims at 290,000 to 325,000 (consensus 305,000) vs the 280,000 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 304,250 (reported last week as 304,000) to 299,500.

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

    (click to enlarge)

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

    Tags: economy
    Sep 20 6:12 AM | Link | Comment!
  • Everyone Thinks Retail Sales Improved, I Do NOT

    Retail sales were improved according to US Census and at expectations. Our analysis disagrees. Note that the 3 month rolling average of sales growth is continues to decelerate.

    I do not like the seasonal adjustment methodology of US Census. The unadjusted data is saying that retail sales are going along at a good clip - but is not suggesting an improving trend.

    Econintersect Analysis:

    • unadjusted sales rate of growth decelerated 1.6% month-over-month, but up 3.2% year-over-year.
    • unadjusted sales 3 month rolling year-over-year average growth decelerated 0.6% month-over-month to 4.1% 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)

    /images/z retail1.png

    • unadjusted sales (but inflation adjusted) up 1.5% year-over-year
    • backward revisions were moderate and slightly up;
    • this is an advance report. Please see caveats below showing variations between the advance report and the "final".
    • big box retail and gasoline stores were the big headwind this month for retail sales growth, with auto sales the big tailwind month-overr-month.

    U.S. Census Headlines:

    • seasonally adjusted sales up 0.6% month-over-month, up 4.5% year-over-year
    • the market was expecting:

     

    seasonally adjustedConsensus RangeConsensusActual
    Retail Sales - M/M change0.2 % to 1.0 %0.6%0.6%
    Retail Sales less autos - M/M change0.1 % to 0.5 %0.3%0.3%
    Less Autos & Gas - M/M Change0.2 % to 0.6 %0.4%0.5%

     

    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

    Other Economic News this Week:

    The Econintersect Economic Index for September 2014 is showing our index declined from last months 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 is now growing faster than expenditures growth. The GDP expansion of 4.2% in 2Q2014 is overstated as 2.1% of the growth would be making up for the contraction in 1Q2014, and 1.4% of the growth is due to an inventory build. Still, there are no warning signs that the economy is stalling.

    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 325,000 (consensus 300,000) vs the 315,000 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 303,250 (reported last week as 302,750) to 304,000.

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

    (click to enlarge)

    /images/z unemployment.PNG

    Bankruptcies this Week: Lenco Mobile, Privately-held Associated Wholesalers, Privately-held Trump Entertainment Resorts

    To read more of our analysis this week - [click here]

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

    Sep 13 3:08 AM | Link | Comment!
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