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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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  • Signs Of Economic Acceleration

    Last month, I penned in this instablog that I was concerned about the slowdown in import and export containers. We had two months of data where the year-to-date numbers were under 2013 levels.

    • Container counts correlate well with export / import data;
    • Container counts are released in almost real time with no backward revision;
    • Container counts lead hard EXIM data by at least one month;
    • and container count imports correlate well and leads trends of economic growth.

    Materials that are imported will show up as sales in the economy several months later - so imports are a good forward looking pulse point.

    Export and Import container counts were very strong in March 2014 - reversing the soft data so far this year. The 3 month rolling average for imports is accelerating, but exports are still decelerating despite the good data this month.

    For the month of March 2014:

    • the economically intuitive imports growth accelerated 27.6% month-over-month, is up 4.8% compared to March 2013, and down 1.2% year-to-date. There is a direct linkage between imports and USA economic activity - and growth in imports foretells real economic growth.
    • Export growth (which is an indicator of competitiveness and global economic growth) accelerated 12.3% month-over-month, is up 10.0% compared to March 2013, and is up 2.5% year-to-date.
    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)

    There is reasonable correlation between the container counts and the US Census trade 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)

    Econintersect considers import and exports significant elements in determining economic health (please see caveats below). the takeaway from the graphs below is that imports still have not returned to pre-2007 recession levels, while exports did recover.

    Unadjusted Import Container Counts - Ports of Los Angeles and Long Beach Combined

    (click to enlarge)

    Unadjusted Export Container Counts - Ports of Los Angeles and Long Beach Combined

    (click to enlarge)

    Other Economic News this Week:

    The Econintersect Economic Index for April 2014 is again showing an extremely slight growth deceleration - but a growing economy nonetheless. There are a growing number of soft data points we watch outside of our index which bears watching. The economy remains too strong to recess, and too weak to grow.

    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

    Initial unemployment claims went from 300,000 (reported last week) to 304,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate. The real gauge - the 4 week moving average - improved from 316,750 (reported last week as 316,250) to 312,000. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

    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: Momentive Performance Materials (MPM). Beverly Hills Bancorp

    To view all the economic posts this week - [click here]

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: economy, trade
    Apr 18 12:48 PM | Link | 2 Comments
  • Warning From Wholesale Inventories?

    One month is not a trend - but I was surprised by the size of the increase of wholesale inventories.

    The headlines say February 2014 wholesale sales improved, and inventories jumped. This data series is very noisy, and has been on a roller coaster of one good month / one bad month. This whole data series was revised this month so talking about relative change to last month is pointless. Consider that the three month rolling averages for unadjusted sales is accelerating, but unadjusted inventory levels jumped unusually and are above the range for non-recessionary periods.

    Econintersect Analysis:

    • unadjusted sales rate of growth decelerated 0.2% month-over-month
    • unadjusted sales year-over-year growth is up 3.2% year-over-year
    • unadjusted sales (but inflation adjusted) up 1.4% year-over-year
    • the 3 month rolling average of unadjusted sales accelerated 0.3% month-over-month, and up 5.2% year-over-year
    • unadjusted inventories up 4.6% year-over-year (accelerated 1.1% month-over-month), inventory-to-sales ratio is 1.33 which is historically is very high for non-recessionary periods for Februarys.

    US Census Headlines:

    • sales up 0.7% month-over-month, up 3.1% year-over-year
    • inventories up 0.5% month-over-month, inventory-to-sales ratios were 1.17 one year ago - and are now 1.19.
    • the market expected an inventory change of 0.3% to 0.7% (consensus 0.6%) versus the headline 0.7% growth.
    Year-over-Year Growth - Wholesale Sales - Unadjusted data (blue line), Inflation Adjusted Data (red line), and 3 month Rolling Average of Unadjusted data (yellow line)

    (click to enlarge)

    The short term year-over-year trend for sales is now fluctuating in a narrow range after an improving period beginning in early 2013.

    But the real issue is with inventories. Overall, the inventory-to-sales ratios (a rising ratio is an indicator of economic slowing) above the normal range for past February.

    Unadjusted Inventory-to-Sales Ratio (blue line, left axis) and Year-over-Year Change Unadjusted Inventory-to-Sales Ratio (red line, right axis)

    (click to enlarge)

    /images/z wholesale1.PNG

    The red line showing year-over-year change is what should be important - this line seemed to show a flat inventory trend. However, if we look at the blue line, we see a very large jump. Taking the data and displaying it graphically in a different way - one can see a trend change jump signals a change in growth trends or even a recession..

    Year-over-Year Change in Inventory Levels - Unadjusted Data

    I am not suggesting this is an indicator of a recession (I don't believe this for a second) - but it could be an indicator of a slowing economy.

    Other Economic News this Week:

    The Econintersect Economic Index for April 2014 is again showing an extremely slight growth deceleration - but a growing economy nonetheless. There are a growing number of soft data points we watch outside of our index which bears watching. The economy remains too strong to recess, and too weak to grow.

    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

    Initial unemployment claims went from 326,000 (reported last week) to 300,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate. The real gauge - the 4 week moving average - marginally improved from 321,000 (reported last week as 319,500) to 316,250. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

    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: Tuscany International Drilling, James River Coal, DynaVox, Coldwater Creek, Privately-held Glacial Energy Holdings

    To view all of our analysis this week - [click here].

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 12 8:47 AM | Link | 1 Comment
  • One Encouraging Data Point Showing The Economy May Be Improving

    I am a fan of non-monetary measures which are economic pulse points. Literally everything we buy at one point or another traveled by trucks and rail - and even trucks ride on rail. Rail is a great pulse point because the USA data is consolidated (literally every rail movement in the USA is provided by the Association of American Railroads).

    Truck would be the best data point but unfortunately there is no consolidation, and there is a danger in looking at only a portion of the data (and assuming it is representative).

    Many of the commodities which ride on rail will appear in retail sales months in the future - this gives rail a forward looking component as the data is issued almost in real time. Here is what the rail data is currently saying for the week ending 29 March 2014:

    The weekly data is fairly noisy, and the best way to view it is to look at the rolling averages:

     Percent current rolling average is larger than the rolling average of one year agoCurrent rate of growth accelerating or deceleratingCurrent rolling average accelerating or decelerating compared to the rolling average one year ago
    4 week rolling average6.4%acceleratingaccelerating
    13 week rolling average2.3%acceleratingaccelerating
    52 week rolling average2.3%acceleratingaccelerating

    USA coal production is up 4.7% same week year-over-year - and coal accounts for almost half of carloads.

    Here is a look at the weekly data comparing it to the same week one year ago, backing out economically less intuitive coal and grain, and comparing growth year-to-date.

    This WeekCarloadsIntermodalTotal
    This week Year-over-Year7.2%13.5%0.9%
    Ignoring coal and grain2.9%  
    Year Cumulative to Date0.9%3.8%2.3%

    [click on graph below to enlarge]

    Current Rail Chart

    (click to enlarge)

    There likely was a weather component in the disappointed rail data earlier in 2014. If there was a weather component, the current surge is only makeup.

    The Econintersect Economic Index for April 2014 is again showing an extremely slight growth deceleration - but a growing economy nonetheless. There are a growing number of soft data points we watch outside of our index which bears watching. The economy remains too strong to recess, and too weak to grow.

    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

    Initial unemployment claims went from 311,000 (reported last week) to 326,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate. The real gauge - the 4 week moving average - marginally improved from 319,250 (reported last week as 317,750) to 319,500. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

    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 list of our posts this week - [click here]

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 05 9:52 AM | Link | 1 Comment
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