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Friday, September 21, 2012

Philly FED data and FedEx

The Philly FED came in negative, but better then expected.  Lets have a look at the main index first.

The main index was still negative, but there was a big surge in the six-month forecast.  Since this is a survey, that could be caused by many things.  Last fall there was a big uptick that was followed by upticks in real orders as the economy picked up.  There have been big upticks before with very little or no follow through.  Just before the last recession there was a significant uptick.  We will have to see if this continues next month.

Here is the new orders index.

The new orders crossed up to +1, the first positive reading since last spring.  The positive cross last fall came from the same negative value, but was much stronger.  I don't think this is strong enough to say much.  I think we will have to wait for next month to see if it gets stronger or goes back negative.

Next up is the employment index.

This one is still in contraction mode (4 of the last 5 months) and scraping along the bottom.  This goes along with the initial jobless claims rising some the last few weeks.  Nothing positive here yet.

Check out these future sub indexes.

There were significant upticks in the future new orders and employment indexes.  Is this based on something real, or hope in the FED?  I don't know how we can know that, but it is an important question.  If it is based on something real it might translate into better data next month.  This might mean something is about to improve in the economy.  If it is simply hope based, then it is probably meaningless.  I think we will have to wait until next month to get a better read.

This is kind of an interesting chart.

Source: Zero Hedge

We have seen a number of leading indicators recently (for example, we were first to note the FedEx implications for GDP) that point to a rapidly rising probability of recession. Today, via Bloomberg Brief, is a look inside the Philly Fed state economic indexes. To be specific, we look at the six-month ahead outlook for each state. Only once in the last 30 years did 20 states possess a negative outlook and the overall economy avoid recession.

The one time we avoided a recession was in 2002 when the stock market crashed to new lows and people were worried about a double dip recession.  This was really a slight relapse in the economy after just coming out of a recession in 2001.  We have a different situation today since we are three years removed from the end of the last recession.  This number is considerably higher then last fall and ticked up a good bit this month.

This is the chart of FedEx referenced in the Zero Hedge article.

In the late 90s FedEx made a major push to expand into international shipping.  The correlation to GDP increased dramatically after that.   I think this chart speaks for itself.  Of course it is not just FedEx with earnings problems.

Source: The Big Picture

So far this month we have seen a significant down turn in industrial production, a slight up turn in initial jobless claims, and continued poor regional manufacturing data.  The economic down turn is gathering steam and corporate earnings are starting to contract.  Not to worry, I am sure the FED will fix all of this.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.