It seems quaint to write about "short leading" and "coincident" indicators while the Great Meteor of Death is screaming down through the atmosphere. But they do give us a window into the underlying strength or weakness of the US economy just as the disaster began to strike.
Retail sales decreased nominally by -0.5% in February. Since consumer inflation increased by +0.1%, real retail sales fell -0.6%. On a per capita basis, they declined -0.7%. This means that not only have neither real retail sales, and real retail sales per capita have made new highs since last August, but they are both at 9 month lows. Here are both measures, normed to 100 as of the August peak:
Since we have gone 6 months without a new high, this is enough to flip both the long and short leading aspects of real retail sales to neutral. Even without coronavirus, another 2 such months would make it a negative. It also means that, even before the coronavirus impact, in February there was in indication that the consumer was beginning to roll over.
Further, because real retail sales (blue in the graph below) tend to lead jobs (red), and are an even better fit for aggregate payrolls (green), this strongly suggests that, even leaving coronavirus impacts aside, employment growth would decelerate significantly in the next few months. Here are the past 10 years:
And Real retail sales YoY look relatively benign only because last February consumption was in the midst of a "min-recession" due to the government shutdown. Real retail sales are only up +0.9% compared with last March. In other words, even without coronavirus I would expect an employment slowdown this spring.
Meanwhile, industrial production, the King of Coincident Indicators, rose +0.6%, but only after January's number was reduced by -0.2%. Further, almost all of the gains were in the volatile utilities sector. Manufacturing only increased +0.1%, with a -0.1% downward revision for January, for a net unchanged number. Production is virtually unchanged YoY, and still significantly below its December 2018 peak:
Together, industrial production and real retail sales tell us that in February, before any significant negative effects from the coronavirus, the production sector remained in a shallow recession, while the consumer sector, which was already treading water for nearly a half year, looked to be rolling over slightly.
Including the strong employment growth in February, the net coincident picture heading into the coronavirus impacts was a very weak economy, not yet in but not far from a recession.
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