It seems like Wall Street is seeing a different economy than I am seeing if the market rise over the last few weeks is based on a strong economy. I saw significant warning signs in retail sales where the headlines suggested the consumer was shaking off increased taxation and buying.
First one month is not a trend. The warning is for me and the Wall Streeters. No matter what anyone saw, one cannot extrapolate one month of data. Per Reuters:
U.S. retail sales expanded at their fastest clip in five months in February, the latest sign of momentum for an economy facing headwinds from higher taxes and pricier gasoline.
The solid sales came on the heels of strong gains in employment and manufacturing. But the improvement in the economic picture is likely insufficient to compel the Federal Reserve to reduce its monetary policy support.
"Consumers have been less fazed by the increase in taxes than we expected," said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh. "Because the labor market has been doing a bit better than we were expecting, people are feeling a bit confident and not cutting back their spending."
Ok, I agree that employment growth was great (the best February of the 21st century) - but employment is a lagging indicator. My studies indicate a lag of 6 months to the economy. Further, variations in employment can be from issues other than economic (such as changes in laws which have a short term impact).
Retail sales were terrible despite headlines which says sales were strong.
- using unadjusted data - inflation adjusted sales actually contracted year-over-year;
- the headline numbers show backward revisions were positive, while the published unadjusted data shows the backward revisions as negative;
- the weakness in the data is main street brick stores.
Year-over-Year Change - Unadjusted Retail Sales (blue line) and Inflation Adjusted Retail Sales (red line)
(click to enlarge)Click to enlarge
The Econintersect economic forecast for March 2012 continues to show weak but somewhat improving growth. The supply chain contraction we saw last month has dissipated with all of our check methods of measuring the economy clearly in expansion territory.
ECRI now believes a recession began in July 2012. ECRI first stated in September 2011 a recession was coming . The size and depth is unknown. The ECRI WLI growth index value has been weakly in positive territory for over three months - but 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 fell from 340,000 (reported last week) to 332,000 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 (background here and here).
The real gauge - the 4 week moving average - also improved from 348,750 (reported last week) to 346,750. 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)
(click to enlarge)Click to enlarge
Bankruptcies this Week: Geokinetics,
Data released this week which contained economically intuitive components (forward looking) were:
Rail movements are somewhat improving.
- retail sales - normally this is a lagging indicator, but our analysis is that the trend may be changing to the downside.
All other data released this week either does not have enough historical correlation to the economy to be considered intuitive, or is simply a coincident indicator to the economy.
Weekly Economic Release Scorecard:
|Is USA Government Debt Finally Under Control?|
|Eating the Dow for Breakfast|
|What A Shock! (Not) Initial Claims Beat Consensus AGAIN! Stock Uptrend is SAFE|
|The Good Economist|
|SAC Capital: The Cost of Doing Business|
|Krugman Doesn't Understand IS-LM, Part 1|
|Investing.com Weekly Wrap-Up 15 March 2013|
|What We Read Today 15 March 2013|
|Markets Down, Flat And Once Again Lackluster|
|Markets Close Gaps - Indices Appear To Be Weak|
|Infographic of the Day: All About Cruise Vacations|
|Is MSN a Day Late and a Video Short?|
|08 March 2013 ECRI's Weekly Leading Index Growth Again Marginally Less Good|
|"Destiny of Destruction Awaits U.S." - North Korea|
|Preliminary March 2013 Michigan Consumer Sentiment Falls to 14 Month Low|
|Averages Head Down, Is This The Correction?|
|February 2013 Industrial Production Growth Strong|
|February 2013 CPI Rises to 2.0% Year-over-Year Inflation|
|March 2013 Empire State Survey Continues to Say Manufacturing Expanding|
|Where Did the Prices Go?|
|As Investors Flee Gold ETFs, Central Banks Jump in as Bigger Gold Buyers|
|Full Time Job Growth is Weak|
|Using Legal Tender Laws Against the State?|
|Minsky Kickstarter Campaign Rolls Toward Finish Line|
|Fed: Not All Large Financial Institutions Capital Plans Okay|
|Fed's Balance Sheet 13 March 2013 Grows Slightly to $3.15Trillion|
|Germany Set To Eliminate Borrowing by 2015|
|SP500 Closes In On Its All Time High - On Low Volume|
|What We Read Today 14 March 2013|
|Our Video of the Day On North Korea Is a Fake|
|Week Ending 09 March 2013: Total Rail Traffic Less Good|
|Infographic of the Day: Comet Pan-STARRS in Night Sky Explained|
|Markets Melting Further Up On Falling Volume|
|North Korea Comedy Show : ORIGINAL: North Korea Comedy Show|
|Indices Mark New Highs On Continued Low Volume|
|09 March 2013 Unemployment Claims 4 Week Average Again Better|
|February 2013 Producer Price Index Increase Due to Energy|
|An Open Letter to Governor Nikki Haley|
|Money for the People: Grillo's Populist Plan for Italy|
|Australia Enters Its Third Decade of Expansion|
|The Relationship Perils of Job Loss: Rebranding Work and Workers|
|Central Banks Slowed Rate Cutting in February 2013|
|Where Do U.S. Life Insurers Invest?|
|Europe: Industrial Production Slumps|
|March Madness Productivity Hit|
|NYSE Summation Has 'Fish Hook' Pattern|
|Markets Closed Up Flat, Lackluster And Looking Tired|
|What We Read Today 13 March 2013|
|Prometheus: Dissecting Mainstream Misconceptions about Likely Stock Market Returns|
|Averages Melt up From Morning Lows Under Low Volume|
|Nonfinancial Leverage NFCI Continues to Deteriorate w/e 08 March 2013|
|Largest telescope scans alien planets|
|Business Inventories and Sales Improve in January 2013|
|Market Briefly Opens Up Then Melt Down|
|Export Price Deflation Continues In February 2013|
|Retail Sales Were Terrible in February 2013|
|Infographic of the Day: Jobs With the Worst Bosses|
|A Background to the Origination Of Soft Currency Economics aka Modern Monetary Theory|
|What Everyone Must Know About The US Dollar: Sea Change Coming?|
|Will 2013 See Record Valuations for Middle Market Business Sales?|
|Location, Location, Location (and Credit)|
|China: Is the Big Sell Underway?|
|Equity Investing: A Global Perspective|
|What We Read Today 12 March 2013|
|Markets Close Down, Mixed, Flat And Directionless|
|Indices Fall Off New Highs Amid Low Volume|
|Gas Fuss: US threatens Pakistan with sanctions over Iran pipeline|
|Markets Open Higher DOW And SP500 Sets New Highs|
|January 2013 JOLTS Continues to Predict Less Good Employment|
|February 2013 Small Business Optimism Slightly Improves|
|Stratfor: Departure in North Korea's Strategy?|
|Week Ending 11 March 2013: Gasoline Prices Fall $0.072 In Last Two Weeks|
|Infographic of the Day: Facts on Flexible Working / Telecommuting|
|Let's Look a Little More Closely at What Bernanke Told Congress|
|Look at the Jobs Report to See How America Has Changed, and Continues to Change|
|SEC: Illinois Charged With Fraud|
|Bonus Cap Legislator, Sharon Bowles: 'Woman' Does Not Make Her An 'Outsider'|
|Why Now Is the Time to Add Australia to Your Portfolio|
|Prometheus: Stock Market Investment Risk Remains at Historic Extreme|
|What We Read Today 11 March 2013|
|The Facts on Medical-Care Spending Growth|
|A Look at Federal Grants to State and Local Governments|
|Markets Cautious Ahead of China, U.S. Retail Data, Big E-U Events in Coming Week|
|Infographic of the Day: New Private Spacecraft for 7 Astronauts|
|Insider Trading 08 March 2013: Carl Icahn's Herbalife Purchase Drives Insider Buying|
|Minsky Program Status|
|Chris Cook: Tax and Spend is a Myth|
|Watching Some Fellow Travelers|
|Carl Sagan Revisited|
|Cracks Appearing In Investor Cycle|
|Lessons This Week: 24 Fundamental and 2 Technical Factors|
|An Infinite Amount of Money|
|Effects of Automatic Stabilizers on the Federal Budget|
|What We Read Today 10 March 2013|
|Over a barrel: Beer duty could kill off UK pubs|
|Sunday Economic Comedy: Economic Advise from Oz|
|Infographic of the Day: Periodic Table of Beer|
|The Week Ahead: With Less Data Opinions are Uninhibited|
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.