By New Deal Democrat
Today sees four important data releases: retail sales, producer prices, industrial production, and total business sales and inventory.
Retail sales, as expected after the punk December auto sales, were negative. Aside from gas, clothing sales also declined (thank you global warming!). Unless the CPI is negative (which is possible), this means a real retail sales decline from November's post-recession high.
Anything that suggests that the services sector is turning is soft is very unwelcome, but it is still only one month. Producer prices, on the other hand, were a slight positive in my reading. That's because deflationary busts end when YoY deflation bottoms, and we have 100 years of producer commodity prices in support of that argument, as I pointed out yesterday.
While producer prices did decline, they didn't decline nearly as much as they did 12 months ago, so here is what the YoY% change in producer prices look like:
We haven't broken out of the 2015 YoY range of declines, although relatively speaking, this was the "least worst" reading in six months, perhaps slight evidence that the global slowdown might be in the process of bottoming.
Industrial production of course was also bad, but most noteworthy is that manufacturing declined slightly, and November's advance in manufacturing was also revised away, meaning the peak in manufacturing was in October. Here's the graph of the overall industrial production (blue) compared with manufacturing (red):
My template is the 2001 business-led recession. Industrial production as a whole is now down nearly as much as it was at the outset of that recession. The silver lining is that it is almost all utilities and mining (oil!). This is not so much of a broad-based downturn so much as a general stall and a horrendous downturn in specific sectors.
Finally, we got a very limited piece of "good news" (in the sense of having an infected tooth pulled) is that while sales declined, business inventories declined even more in November, and October was also revised to a negative number.
This may push Q4 GDP all the way to a negative number. But we need excess inventories to be liquidated, and that is only going to happen if inventories go down. So this is telling us that we are beginning to actually work through the problem.
Yesterday in my forecast for the first half of 2016, I wrote that the slowdown is probably going to bottom out by spring. But today's releases mean the *now*-cast is that the economy at the end of 2015 was a hairbreadth away from recession.