The US Economy In Pictures

Submitted by Lance Roberts of STA Wealth Management,

I have written extensively about the data behind the headline media reports. I have also discussed the importance of the relationship between the underlying data trends relative to broader macroeconomic perspectives.  However, it is sometimes helpful just to view the various economic indicators and draw your own conclusions outside of someone else’s opinion. 

With the economy now more than 4 years into an expansion, which is long by historical standards, the question for you to answer by looking at the charts below is:

“Are we closer to an economic recession or a continued expansion?”

How you answer that question should have a significant impact on your investment outlook as financial markets tend to lose roughly 30% on average during recessionary periods.  However, with margin debt at record levels, earnings deteriorating and junk bond yields near all-time lows, this is hardly a normal market environment within which we are currently invested.

Therefore, I present a series of charts which view the overall economy from the same perspective utilizing an annualized rate of change.   In some cases, where the data is extremely volatile, I have used a 3-month average to expose the underlying data trend.   Any other special data adjustments are noted below.

If you have any questions, or comments, you can email me or send me a tweet:  @stawealth


Leading Economic Indicators

LEI-Coincident-To-Lagging-110413

Durable Goods

Durabld-Goods-Orders-110413

Investment

GDP-GDI-110413

Private-FixedInvestment-GDP-110413

ISM Composite Index

ISM-Composite-110413

Employment & Industrial Production

Employment-fulltime-joblessclaims-103113Capacity-Utilization-110413

Industrial-production-vs-employment-110413Retail Sales

Retail-Sales-110413

Social Welfare

Social-Benefits-DPI-110413

The Broad View

GDP-6-Panel-Chart-110413

Economic Composite

(Note: The Economic Composite is a weighted index of multiple economic survey and indicators – read more about this indicator)

STA-EOCI-GDP-110413

If you are expecting an economic recovery, and a continuation of the bull market, then economic data must begin to improve markedly in the months ahead.  If not, the drag of economic growth will ultimately continue to erode corporate earnings, profitability and weigh on the financial markets. 

For the Federal Reserve, these charts make the case that continued monetary interventions are not healing the economy, but rather keeping it afloat by dragging forward future consumption.  The problem is that it leaves a void in the future that must be filled. 

In my opinion, the economy is far to weak to stand on its own two feet.  Therefore, while the Fed may ease off on the current rate of bond purchases, likely not before mid-2014, it is highly unlikely that they will remove their “highly accommodative stance” anytime soon.

 

    



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