us-economy-exposed-debt-crisis

Tweet Peeks at 3Q2014 GDP for W/E 10-17-2014

@KeithEOuellette: After a reasonably active 2 weeks of key economic data, the news turned more positive than negative (6 to 3), and our overall rating has swung more to positive for 3Q2014. This past week, the GDPNow Forecast of 3Q2014 came in at 3.0% growth. We continue to believe we will attain 3% GDP growth for the balance of the year.

The key is to align the economic news items with the weighted average to determine their impact on GDP. We have done just that in estimating GDP growth, utilizing our simple rating model.
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For an explanation of the ratings, please refer to the post describing the Rating System.
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strong>FINAL SUMMARY OF 3Q2014 RATINGS
POSITIVE = 36
NEUTRAL = 22
NEGATIVE = 28
As of October 17, 2014
—————————–

  • ISM’s Non-Manufacturing (Services) Composite Index is down slightly in Sep’2014. http://t.co/fajHHtTQXl
    RATING = <2>
  • ***************

  • The US Headline Unemployment Rate falls under 6% thanks to a surge in Sept’2014 jobs per the BLS. http://t.co/PuqzZC5e3E
    RATING = 2
  • ***************

  • Real Earnings for Private Employees improves dramatically. The trend continues to move up. http://t.co/nDR2R8tblW
    RATING = 2
  • ***************

  • New Jobless Claims come in at 287,000 and 4-week moving average is at its lowest since early 2006. http://t.co/shE19PSUw7
    RATING = 2
  • ***************

  • Light Vehicle Sales’ long-term trend continues to lead the US Economy since The Great Recession. http://t.co/wqutDEUyek
    RATING = 2
  • ***************

  • The Advance Estimate for September Retail Sales fell 0.3%, which was way below expectations. http://t.co/85lTwyUjda
    RATING = <2>
  • ***************

  • Small Business Optimism drops in Sept based on Oct update to 95.3, a 0.8 point contraction. http://t.co/YH6B89SYsf
    RATING = <2>
  • ***************

  • The Producer Price Index declines for the 1st time in 13-months, and came in at <0.1%> for Sept. http://t.co/v2FHSyhGSL
    RATING = 1
  • ***************

  • Sept’s Industrial Production rebounds 1% mo. over mo. from Aug’s contraction; plus to Big4 growth. http://t.co/XHmdAc2que
    RATING = 2
  • ***************

  • Michigan Consumer Sentiment up to 86.4; highest rating since Jul’07, oblivious to the correction. http://t.co/9x8YtOt7x2
    RATING = 2
  • ***************
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Is the S&P 500 at the Point of No Return?

image5 300x218 Is the S&P 500 at the Point of No Return?

The Correlation Between the S&P 500 Index and Jobless Claims

On Thursday, we saw the S&P 500 swing wildly, dropping 1.47% at the bell, after Initial Jobless Claims fell to its lowest level since the year 2000. The markets recovered almost 1% during the day and ended up the day where it started. If you look at the chart illustrated by Doug Short’s Post, “A Volatile Road to Nowhere,” the S&P 500 usually rises when jobless claims (inverse red line shown in graph) fall. This makes sense, doesn’t it? Stock prices should rise when the economy is improving. But, it did not this time since we ended up level for the day.

On Friday, the S&P 500 opened the day higher rising to its peak at 1.9% by midday, and then settling at a 1.3% gain. It must have been a delayed reaction to Thursday’s good news on jobless claims. For the week, we ended up with a 1% loss. The wild swings between highs and lows (about a 5% spread) suggests that the US Economy is fragile right now.

This high volatility may be a sign of bad things to come in 2015. Before Friday’s rally, the S&P 500 gained less than 1% for the entire year through October 16, 2014. Yesterday’s recovery brought us back to over a 2% gain on the year. Is the S&P 500 at the point of no return?

The real question is whether this month’s stock price activity, currently at a 7% contraction, will turn into a 10% Correction during October. The stock market and the whimsical nature of investors are not giving us the whole story. We need to turn to current economic trends and the underlying truth in the US Economy before following the crowd.

The Atlanta Fed’s GDPNow forecast of 3Q2014 notched back up to an estimated 3% growth rate, thanks to the rebound of Industrial Production, after seeing Small Business Optimism and Retail Sales fall in September. As noted in our Post on “A 6-Month Comparison of 4Q2013 and 2Q2014,” the US Economy grew 2.7% and 1.5% respectively. The 1st Quarter of 2014 actually contracted <2%>, while the 2Q2014 grew at a 4.2% clip (a distortion due to the contraction). In other words, a 3% GDP growth rate is running at a fairly good clip in comparison to the last couple of years.

It will be interesting to see which way the stocks run over the remainder of the year. If you look again at the chart above, the S&P 500 consistently falls just prior to a recession, a few months before Jobless Claims start increasing again. Are we now at the point of no return, or is this stock market just running towards the long-expected 10% Correction? My gut says that it is just a correction, because the economy is not that bad, although growth is slowing down. We will see soon enough!

Atlanta Fed’s GDPNow Comes in at 2.9% Estimate for 3rd Qtr

image4 300x247 Atlanta Feds GDPNow Comes in at 2.9% Estimate for 3rd Qtr

Atlanta Fed’s GDPNow Comes in at 2.9% as of October 15, 2014

It has been 2 weeks since the last estimate of 3Q2014 GDP. On Oct 3rd, GDPNow came in at 3.2%, but the high during the period prior was 3.6% growth. In other words, current economic indicators have negatively impacted GDP by 0.7%, or a 20% drop since early September.

The major change that contributed to the drop in the current estimate was the reduction of Personal Consumption Expenditures from 2.0% to 1.7%, thanks to the contraction in retail sales.

We continue to believe we can maintain the run rate of 3% growth through the remainder of 2014.

The Atlanta Fed’s Economic & Financial Hightlights(Oct 7, 2014)

image15 The Atlanta Feds Economic & Financial Hightlights(Oct 7, 2014)

US Economy Exposed – Debt Crisis

Been AWOL this week due to prior commitments from both a mid-week Post and Daily Twitter update perspective, so I decided to present this week’s update from The Atlanta Fed, in lieu of the usual Tweet Peeks for the current quarter’s estimated GDP. We have another 2+ weeks before the Advance Estimate of 3Q2014 is released, so we will issue our Final Estimate for the 3rd Quarter during Week-Ending 10-24-2014.

In the meantime, this is just a quick summary of current economic trends, which illustrates continued growth, but at a slower rate. This Summary was taken from the Atlanta Fed’s October 7, 2014 update of their Economic & Financial Highlights series on key economic indicators.

Here is the latest economic indicator updates:

  • Unemployment Insurance claims continue to fall weekly and the 4-week average of new initial claims came in under 300,000.
  • The Conference Board’s Consumer Confidence Index fell over 10%, while ADP’s Consumer Sentiment Index rose over 5% indicating a mixed bag of horrors. (Sorry, I couldn’t resist. It is Oct!)
  • The nominal International Trade Deficit has narrowed for the 4th consecutive month through August.
  • Real Personal Consumption Expenses rebounded 0.5% in August, month over month, thanks to a surge in light vehicle sales.
  • ISM’s Manufacturing Index fell almost 5% in September, but is the 16th consecutive month of expansion in this sector.
  • Non-Farm Employment growth accelerated in Sept with 248,000 new jobs added, bringing the average monthly gain to 227,000 during 2014.
  • Though the labor force participation rate has been essentially unchanged since April when it was 62.8 percent, September’s 62.7 rate is its lowest since 1978.
  • In August, the personal savings rate fell to 5.4 percent from a revised 5.6 percent in July. However, the savings rate has been above 5.0 percent for the past five consecutive months. Year over year, real disposable personal income rose 2.7 percent in August.

Most of the time, I am able to keep up with daily Twitter updates on economic trends and critical mid-week posts, so hopefully this week’s inactivity was only a 1-time event.

us-economy-exposed-debt-crisis

Tweet Peeks at 3Q2014 GDP Growth for W/E 10-03-2014

@KeithEOuellette: After a reasonably active week of key economic data, the news turned more negative than positive (3 to 5), but our overall rating is still leaning towards positive so far in 3Q2014. This past week, the GDPNow Forecast of 3Q2014 fell down to 3.2% growth. We continue to believe we will attain 3% GDP growth for the balance of the year.

The key is to align the economic news items with the weighted average to determine their impact on GDP. We have done just that in estimating GDP growth, utilizing our simple rating model.
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For an explanation of the ratings, please refer to the post describing the Rating System.
|
FINAL SUMMARY OF 3Q2014 RATINGS
POSITIVE = 32
NEUTRAL = 21
NEGATIVE = 25
As of October 3, 2014
—————————–

  • The Big 4 LEI Continues Its Growth Trend in 2014 http://t.co/9OwplLNF0U
    RATING = 2
  • ***************

  • Is the US Economy Sinking Into Oblivion? http://t.co/emW1ZZ2HFz
    NO RATING FOR OPINIONS
  • ***************

  • GDPNow forecast for 3Q2014 increases to 3.5% growth with Personal Income 0.3% increase in Aug’14. http://t.co/NtcuW9P7Zv
    RATING = 2
  • ***************

  • Conference Board’s Consumer Confidence Index in Sep’14 fell to 86.0 from Aug’14 Final 93.4 level. http://t.co/9ia2aFsPsX
    RATING = <2>
  • ***************

  • Are we at risk for heading towards a deflationary economy! The Feds monetary policy did not work! http://t.co/s708x4hagv
    RATING =<2>
  • ***************

  • Sep’14 ISM’ Manufacturing Index disappoints and came in at 56.6, significantly under expectations. http://t.co/ltADVFrTww
    RATING = <2>
  • ***************

  • GDPNow Forecast for 3Q2014 Falls to 3.2% due to drop in light vehicle sales. http://t.co/uxfQYPsDyi
    RATING = <2>
  • ***************

  • Unemployment claims came in below expectations & is now at interim low since turn of the century. http://t.co/wfSo6QLK8Q
    Rating = 2
  • ***************

  • Part-Time vs Full-Time Employment Ratio is moving in the right direction, but only slightly. http://t.co/fkfbPS7kas
    Rating =1
  • ***************

  • Current US Economic Trends – 3Q2014 http://t.co/WiyDShScnH
    RATING = 1
  • ***************
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