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Monday, December 3, 2012

More economic data

This first item is one I have not shown before.  I think it is telling us something now.  Check out this chart.


One thing people commonly do when they feel the need to cut expenses is to eat out less.  That is currently happening again.  Since the end of the last recession this is the third time this index has gone meaningfully negative.  In 2010 and in 2011, the drop in the index was in response to the market crashes in those years.  People got scared and cut back.  This was evident across all economic data, not just this index.  Clearly the current drop was not caused by a market crash.  Is it a reaction to the media blitz on the fiscal cliff?  In
Recession? I said

A Chinese restaurant I go to periodically has been completely empty twice two months.  Nobody eating in or getting take out.  I have been going there since 2005 and the only other times I ever saw it completely empty were in late 2008 and early 2009 during the great recession.

Both of the times the restaurant was empty came before the media blitz on the fiscal cliff that occurred after the election.  I suspect the drop in this index has nothing to do with the fiscal cliff.  Notice this index had a similar drop as the last recession got started.  It also had a pretty serious spike up in early 2009 before the recession officially ended.  It had a similar spike up in 2003 that started about the same month stocks were bottoming that year.  This index stayed positive that entire bull market and never went negative until the next recession.  It looks a little differently this time, doesn't it.  The great recession has made people generally more frugal and they go through periods where they cut back on spending.

Lets take a peek at the Chicago ISM data.

The main index ticked up a bit and back in to expansion territory.  It is still much weaker then it was last fall in the recession scare.  This is not enough of a move up to say with any certainty that this is a sign of things improving.

This was a sizable drop in the new orders index.  This is the lowest this index has been since the last recession ended.  The economy in this part of the country is not surging ahead.

The order backlogs have now contracted 5 of the last six months.  With backlogs and new orders contracting this next index seems odd to me.

There was a surge in the employment index.  So their new orders are contracting and so are their backlogs, but they need more people?  This is a positive if it is real.  I guess we will have to see what happens in the future.

Both of these pieces of data are more consistent with further slowing then with an uptick in the economy.  I keep hearing people on TV telling me the economy is picking up, but I am having a lot of trouble seeing it in the data.  The GDP is useless data in real time.  The revisions are often huge.  The revisions to the employment data can also be significant which makes it pretty poor in real time also.  The most reliable data is signaling we are in a recession now.  One thing to keep in mind.  People are not going to go on TV in large numbers and claim the economy is in recession.  If everybody all of a sudden figured that out the market would crash similar to 1987.  Once the market gets considerably lower more and more people will fess up to the recession.  It has always been this way and I am sure will continue.  People figure it out slowly, but surely over time.  This causes a somewhat less violent move down in the market in the early stages.  He who sells first, sells best.  I think this is only the second time the market topped after the recession started.  I would view this situation as a gift by the market to people.  However, the majority have absolutely no idea what is about to happen in the next year.


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