What is interesting to me is how GDP is measured in real dollars (inflation adjusted) - and the pundits continue to look at data releases in current dollars. Hello! - we are in a near deflationary situation and you have to look at things in inflation adjusted dollars.
Two releases this week were immune from this "inflation" issue as they are based on counting things - residential building (which counts permits and construction completions) and industrial production (indexed production level). I like to look at rolling averages as the individual monthly data is not accurate when released - but averaging softens these errors.
The headlines say seasonally adjusted Industrial Production (NYSE:IP) improved.Econintersect's analysis agrees - AND consider that the unadjusted rolling averages are continuing to accelerate. However, growth was weaker than expectations.
- Headline seasonally adjusted Industrial Production (IP) increased 0.2% month-over-month and up 4.8% year-over-year.
- Econintersect's analysis using the unadjusted data is that IP growthaccelerated 0.2% month-over-month, and is up 4.5% year-over-year.
- The unadjusted year-over-year rate of growth accelerated 0.1% from last month using a three month rolling average, and is up 4.6% year-over-year.
Unadjusted Industrial Production year-over-year growth for the past 12 months has been between 2% and 4% - it is currently 4.5%. It is interesting that the unadjusted data is giving a smooth trend line.Year-over-Year Change Total Industrial Production - Unadjusted (blue line) and the Unadjusted 3 month rolling average (red line)
Residential building permits had a major backward revision this month that went back two years. Construction completions were less than permits which is positive for a change. As the data is noisy and with backward revisions, the rolling averages are the best metric to view this series - and the growth continues to decelerate.Unadjusted 3 Month Rolling Average of Year-over-Year Growth - Building Permit (blue line) and Construction Completions (red line)
So we have one data series (industrial production) where the growth rate is accelerating, and another (residential building) where the opposite is occurring. My belief is that residential building sector continues to be dogged by a demographic shift in what defines a family unit, the overbuilt situation of homes - and the importance of owning one's own home.
Other Economic News this Week:
The Econintersect Economic Index for February 2015 continues to show a stable and growing economy - again with a modest decline in growth from last month. All portions of the economy outside our economic model - except residential housing - are showing reasonable expansion. The growth trend line for our model is decelerating, however, if we toss in a few more elements which we analyze (but do not include) in our economic forecast model (such as employment or consumer sentiment) - the trends are improving rather than slowing.
The ECRI WLI growth index value being slightly into negative territory implies the economy will not have grown six months from today.Current ECRI WLI Growth Index
The market was expecting the weekly initial unemployment claims at 270,000 to 305,000 (consensus 290,000) vs the 283,000 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 289,750 (reported last week as 289,750) to 283,250. The rolling averages have been equal to or under 300,000 for the 22 of the previous 23 weeks.Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line), 2015 (violet line)
Bankruptcies this Week: Winland Ocean Shipping, Cayman Islands-based Caledonian Bank Limited (Chapter 15), Allen Systems Group
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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.