USA Q2 GDP Revised Slightly Upwards to +1.7% (Chart)

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USA Economy: "Sharp acceleration in imports and a sharp deceleration in private inventory investment"

USA Q2 GDP Revised Slightly Upwards to 1.7%

The Bureau of Economic Analysis released their Third Estimate of 2010 Q2 GDP which was +1.7%, up +0.1% from the Second Estimate of +1.6% for a total GDP of $14.579 billion. This is lukewarm data, not good but could be worse.

A +3.0% annualized GDP growth rate is generally accepted as the minimum necessary to generate jobs  growth. Therefore, the USA is growing at approximately 50% of the rate necessary to bring down the unemployment rate. The Big Question is where is the USA economy headed? Three scenarios are being much discussed: 1) a double dip recession whereby the GDP will turn negative soon, 2) the economy will continue this "bottom bouncing" with very slow growth which may adversely affect the unemployment rate (i.e., less than +3.0% growth), or 3) the bottom is in and GDP growth will accelerate and happy days will be here again.

As one economist noted, it was as if the USA economy hit an invisible wall by June 2010. Q1 GDP per the Bureau of Economic Analysis was +3.7% which was enough to create jobs and reduce the unemployment rate. The Q2 GDP is estimated at about half that at +1.7% and is not considered a GDP that reflects a robust recovery. Of the three scenarios mentioned in the previous paragraph, the first two (double dip recession or bottom bouncing) seem the most likely onwards into 2011.

USA GDP by Quarter (Chart) Below is a chart of the latest 22 quarters (4 years) of USA GDP as reported by BEA from 2005 Q1 through 2010 Q2. As can be seen, there was a negative dip into the Great Recession beginning 2008 Q1, a rebound peaking with the 2009 Q4, a downward trend in 2010 Q1 and Q2. The 2010 Q2 GDP of +1.7% is the same as the 2009 Q3 GDP (+1.6%). The USA economy, based on this chart, does appear to be at a crossroads: a continuing downwards trend towards zero growth or a bounce upwards from here?

The moving 4-quarter average (1 year) is +3.00% which is a break-even economy on jobs, perhaps creating a small net increase in jobs - but is not robust. The 22-quarter average +1.17% per quarter, which is a stalled economy, a flat economy that is not producing jobs and has an increasing unemployment rate. However, the current +1.7% is above this average.

The Bureau of Economic Analysis Commentary on the 2010 Q2 GDP of +1.7% (Third Estimate)

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.7 percent in the second quarter of 2010, (that is, from the first quarter to the second quarter), according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent.

The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 1.6 percent (see "Revisions" on page 3).

The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures, nonresidential fixed investment, exports, private inventory investment, federal government spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the second quarter primarily reflected a sharp acceleration in imports and a sharp deceleration in private inventory investment that were partly offset by an upturn in residential fixed investment, accelerations in nonresidential fixed investment and in federal government spending, and an upturn in state and local government spending.

Final sales of computers added 0.03 percentage point to the second-quarter change in real GDP after adding 0.10 percentage point to the first-quarter change. Motor vehicle output subtracted 0.06 percentage point from the second-quarter change in real GDP after adding 0.74 percentage point to the first-quarter change.


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USA Weekly Unemployment Claims at 3 Week Low (Charts) *Total Claims 453,000*

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United States Department of Labor: Unemployment Insurance Weekly Claims Report

USA Weekly Unemployment Claims at 3 Week Low

Official Statement The Department of Labor reported, "In the week ending Sept. 25, the advance figure for seasonally adjusted initial claims was 453,000, a decrease of 16,000 from the previous week's revised figure of 469,000. The 4-week moving average was 458,000, a decrease of 6,250 from the previous week's revised average of 464,250. The advance seasonally adjusted insured unemployment rate was 3.5 percent for the week ending Sept. 18, a decrease of 0.1 percentage point from the prior week's revised rate of 3.6 percent. The advance number for seasonally adjusted insured unemployment during the week ending Sept. 18 was 4,457,000, a decrease of 83,000 from the preceding week's revised level of 4,540,000. The 4-week moving average was 4,526,750, a decrease of 5,500 from the preceding week's revised average of 4,532,250."

Cycle History Weekly unemployment claims for the week ended September 25, 2010 are down -198,000 and -30.4% from the Great Recession peak of 651,000 for the week ended March 28, 2009. The current unemployment claims are up +26,000 and +6.1% from the subsequent low of 427,000 for the week ended July 10, 2010. Therefore, current claims are closer to the cycle bottom than the peak.

Trend Weekly unemployment claims continue below the recent 2010 peak of 504,000 for the week ending August 14 (6 weeks ago). The current claims of 453,000 are below the 4-week moving average of 458,000, and also below the 13-week, 26-week, and 52-week moving averages of 467,308, 464,808, and 476,635, respectively. Weekly unemployment claims are within a recent range with a peak of 504,000 and trough of 427,000 and the 4-week moving average is trending downwards.

Chart (4-Week Moving Average) The chart below shows the 4-week moving average for the last 52 weeks (1 year) of weekly total unemployment claims, from the week ended October 3, 2009 through the latest week reported, September 25, 2010. The 4-week moving average is considered a better, smoother metric. The recent trend has been downwards since the recent peak of 488,000 for the week ended August 21, 2010.  Longer-term, the 4-week moving average dropped significantly to reach a first low of 462,500 for the week ended January 9, 2010. After an increase, another low was set of 448,000 for the week ended March 27, 2010. This has been the Great Recession cyclical low to-date.

Chart (Weekly Unemployment Claims) The chart below shows the total weekly unemployment claims for the last 52 weeks (1 year) from the week ended October 3, 2009 through the latest week reported, September 25, 2010. A general decline in claims is indicated, with a recent peak of 504,000 reached for the week ended August 14, 2010 and a Great Recession low of 427,000 reached for the week ended July 10, 2010 which has been the cyclical low to-date.

Commentary The 4-week moving average is now trending downwards, which is encouraging. Weekly claims, after reaching a peak of 504,000 (which was the first time greater than 500,000 since the week ended November 14, 2009), are continuing within a range with a peak of 504,000 and trough of 427,000. Obviously claims at the 500,000 level is a benchmark, as is the 400,000 level. Weekly claims have not been below 400,000 for over 2 years, since the week ended July 12, 2008 claims of 385,000. Weekly claims first dropped below 500,000 in this Great Recession Cycle for the week ended November 21, 2009 at 477,000. So recent weekly claims have been in this range since November 21, 2009 with only one exception. Claims over 500,000 clearly indicate GDP growth is slowing, if not stalling, while claims less than 400,000 indicate a decent economic recovery is underway. Hence the uncertainty over the pace of the USA economic recovery.

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USA Monthly Consumer Confidence Index at 7 Month Low (Chart) "Confidence in state of economy remains quite grim"

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USA Economy: "Overall, consumers’ confidence in the state of the economy remains quite grim"

USA Monthly Consumer Confidence Index at 7 Month Low

Official Statement "The Conference Board Consumer Confidence Index^®, which had improved in August, retreated in September. The Index now stands at 48.5 (1985=100), down from 53.2 in August. The Present Situation Index decreased to 23.1 from 24.9. The Expectations Index declined to 65.4 from 72.0 last month. Says Lynn Franco, Director of The Conference Board Consumer Research Center: 'September’s pull-back in confidence was due to less favorable business and labor market conditions, coupled with a more pessimistic short-term outlook. Overall, consumers’ confidence in the state of the economy remains quite grim. And, with so few expecting conditions to improve in the near term, the pace of economic growth is not likely to pick up in the coming months.'”

Cycle History The current Consumer Confidence Index (CCI) in September of 48.5 (preliminary) is down -63.4 and -56.7% from the cyclical peak 111.9 in July 2007. The current CCI is up +23.2 and 91.7% from the cyclical bottom of 25.3 in February 2009. Therefore, the CCI is much closer to the cyclical low than to the high.

Trend The current trend has been  downwards. The September CCI of 48.5 (preliminary) is below the 12-month moving average of 53.0 and has been for 3 consecutive  months. The September CCI of 48.5 is above the 24-month moving average of 47.8 and below the 36-month moving average of 55.4.

Chart (Monthly Consumer Confidence Index) Below is a chart of the latest 69 months of The Conference Board CCI from January 2005 through the latest month reported, September 2010 (preliminary). As can be seen, the CCI bottomed in February 2009 and the Great Recession officially ended in June 2009. After a peak in May 2009 of 54.8, the CCI has been in a range from a low of 46.4 in February 2010 to a high of 62.7 in May 2010. The current CCI of 48.5 is very close to the recent low of 46.4 in February 2010.

Commentary The September Consumer Confidence Index of  48.5 is very close to the recent low of 46.4 in February 2010 and is described as "grim" by Lynn Franco, Director of The Conference Board Consumer Research Center. The CCI is closer to the cyclical low of 25.3 in February 2009 than the cyclical high of 111.9 in July 2007, as evidenced by the above chart. This coincides with the Thomson Reuters/University of Michigan's preliminary September reading of 66.6 which was a 13-month low.

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USA Monthly Leading Economic Index at New High in August (Chart) "Recent pace of growth disappointingly slow"

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USA Economy: "Recent pace of growth has been disappointingly slow"

USA Monthly Leading Economic Index +0.3% in August

Official Statement "The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.3 percent in August to 110.2 (2004 = 100), following a 0.1 percent increase in July, and a 0.2 percent decline in June. Says Ken Goldstein, economist at The Conference Board: 'While the recession officially ended in June 2009, the recent pace of growth has been disappointingly slow, fueling concern that the economic recovery could fade and the U.S. could slide back into recession. However, latest data from the U.S. LEI suggest little change in economic conditions over the next few months. Expect more of the same – a weak economy with little forward momentum through 2010 and early 2011.' Says Ataman Ozyildirim, economist at The Conference Board: 'The U.S. LEI, which began rising three months before the end of the recession, remains on a general upward trend. However, the pace has been slowing. Correspondingly, current economic conditions, as measured by The Conference Board CEI, have been essentially flat since May, after reaching a bottom in June 2009. Taken together, the composite indexes are consistent with a slowly expanding economy in the near term.'"

Cycle History The current LEI in August of 110.2 (preliminary) is at a cyclical high. The current LEI is up +12.3 and +12.6% from the cyclical bottom of 97.9 in March 2009.

Trend As noted by The Conference Board, the general trend is upwards. The August LEI of 110.2 (preliminary) is above the 12-month moving average of 108.0. The 12-month moving average has been increasing, ascending, each month in 2010. The August LEI of 110.2 is also above the 24-month moving average of 103.9, which is also increasing.

Chart (Monthly Leading Economic Index) Below is a chart of the latest 25 months of The Conference Board LEI from the August 2008 through the latest month reported, August 2010 (preliminary). As can be seen, the LEI bottomed in March 2009 and the Great Recession officially ended in June 2009. The LEI then began ascending to the current August 2010 peak, although the rate of increase has slowed. Concomitant with the slowing rate of increase in the LEI has been the USA GDP growth being revised downwards for the second half of 2010.

Commentary The August LEI (preliminary) eked out another gain to set a cyclical high of 110.2, subject to revision. The LEI has come a long way from the March 2009 cyclical low of 97.9, so even as the rate of increase has slowed, as evidenced by the above chart, the LEI is still ascending. The LEI did peak in March 2010 and May 2010 but the August 2010 data has now regained and exceeded these peaks.

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Global All-Industry Output Index Dips to 6 Month Low (Chart) *Expanding at Slower Rate in August*

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Global All-Industry Output Index Dips -0.7%

Global All-Industry Output Index at 6 Month Low, Expanding at Slower Rate

Official Statement The JPMorgan statement about the August 2010 Global All-Industry Output Index: "At 53.9 in August, the JPMorgan Global All-Industry Output Index signalled that world economic activity had expanded for the thirteenth successive month. However, the rate of increase eased further from April's 34-month high to its weakest since February."

The JPMorgan Global All-Industry Output Index (Global Manufacturing & Services PMI) decreased -0.7% to 53.9 in August. This was the fourth consecutive monthly decrease since the April 2010 peak of 57.7. The August -0.7% decrease followed the three previous declines of -0.8%, -1.6%, and -0.7% in July, June, and May, respectively.

David Hensley, Director of Global Economics Coordination at JPMorgan, said: "August PMI data pointed to a further downshift in the rate of recovery of the global economy. Growth of global GDP is likely to slow to around 2.5% in the third quarter, down from a peak of almost 4% in the second quarter. However, what we are seeing is more in line with a moderation than a sharp slowdown, suggesting that there is still sufficient momentum heading forward to maintain the recovery."

Cycle History The data on the chart below is limited to the latest 13 months ending August 2010. The August Global All-Industry Output Index is down -3.8 and -6.6% from the intermediate-term peak of 57.7 in April 2010. The current Index  is up +2.2 and +4.3% from the intermediate-term bottom of 51.7 in November 2009. Therefore, the current August 2010 Global All-Industry Output Index is near mid-range from the recent top and bottom, somewhat closer to the bottom.

Trend The August Global All-Industry Output Index of 53.9 has now just barely dropped below the 12-month moving average of 54.4. Since the peak in April 2010, each month has been lower now for 4 consecutive months (May through August). However, any value over 50 indicates expansion so the growth continues at a slower pace.

Chart (Global All-Industry Output Index) Below is a chart of the latest 13 months of the Global All-Industry Output Index from August 2009 through the latest month reported, August 2010. The Index has been greater than 50, indicating global services are expanding, since August 2009 - 13 consecutive months. The Index peaked in April 2010 at 57.7. Four consecutive monthly declines have ensued through this latest August 2010 decline. However, the four consecutive monthly declines still indicate global output is expanding, just at a slower rate.

About The Global Manufacturing & Services PMI (Global All-Industry Output Index)

The Global Report on Manufacturing & Services is compiled by Markit based on the results of surveys covering over 11,000 purchasing executives in almost 30 countries. Together these countries account for an estimated 84% of global GDP. Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease. 50.0 = no change level.

Data sources: Country % share of global GDP
United States 28.8
Japan 12.8

China 6.5
Germany 5.2
United Kingdom 4.3
France 3.8
Italy 2.9
Brazil 2.1
India 2.0
South Korea 1.9
Spain 1.8
Mexico 1.7
Australia 1.3
Netherlands 1.1
Russia 1.1
Turkey 1.0
Taiwan 0.8
Switzerland 0.7
Poland 0.6
Austria 0.6
South Africa 0.5
Denmark 0.4
Greece 0.4
Israel 0.4
Ireland 0.3
Singapore 0.3
Czech Republic 0.2
New Zealand 0.2
Hungary 0.2


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USA Weekly Leading Index Dips to 2 Week Low (Charts) *Still premature to predict a new recession*

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Weekly Leading Index: Is the USA Economy Bottom Bouncing?

USA Economic Weekly Leading Index Above 122 for 3 Weeks

Overview The USA Economic Weekly Leading Index was -0.4 at 122.2 for the week ended September 17, 2010. This is the third consecutive week the WLI has held above 122.

Cycle History The WLI for the week ended September 17 is down -12.5 and -9.3% from the peak of 134.7 for the week ended April 3, 2010. The current WLI is up +1.8 and +1.5% from the bottom of 120.4 for the week ended July 16, 2010. Therefore, the current WLI of 122.2 is closer to the cyclical trough than peak.

Trend The WLI of 122.2 is above the 13-week moving average of 121.2 for the third consecutive week. The WLI continues below the 26-week moving average of 124.9 for the 19th consecutive week. The WLI continues below the 52-week moving average of 127.3.

Chart (Weekly Leading Index) Below is a chart of the latest 52 weeks (1 year) of the ECRI Weekly Leading Index, from the week ended September 25, 2009 through the latest week reported, September 17, 2010. As can be seen, the WLI peaked in late April 2010, declined significantly, and now appears to be bottom bouncing without trend. Concomitant with the WLI decline this summer has been USA GDP growth being revised downwards for the second half of 2010.

USA WLI Annualized Growth Rate at 13 Week High

Overview The WLI Annualized Growth Rate (AGR) was -8.7% for the week ended September 17, 2010, a 13 week high, the third consecutive weekly increase, and a rise of an impressive +0.6.

Cycle History The AGR for the week ended September 17 is down -36.5 and -131.3% from the peak of +27.8% for the week ended October 9, 20009. The current AGR is up +2.3 and +20.9% from the bottom of -11.0% for the week ended July 23, 2010. Therefore, the current AGR of -8.7% is closer  to the cyclical trough than peak.

Trend The AGR is in an uptrend, has increased for three consecutive weeks, and increased 7 of the last 8 weeks. This was after 12 consecutive weekly declines from the week ended May 7, 2010 to the week ended July 23, 2010.

Chart (Annualized Growth Rate) Below is a chart of the latest 52 weeks (1 year) of the ECRI WLI Annualized Growth Rate, from the week ended September 25, 2009 through the latest week reported, September 17, 2010. As can be seen, the annualized growth rate peaked at +27.8% in early October 2009 and began a decline with intermittent leveling off. A negative growth % was reached in early June 2010 and the rate has remained negative since.

Commentary The Weekly Leading Index projects forward approximately 6 months and the Annualized Growth Rate is relative to the WLI. That is, the overall higher WLI in 2010 mitigates some of the recently negative AGR. The WLI is off the bottom reached in mid-July and is in a recent uptrend. The AGR is also off the bottom reached in late July and has recently uptrended. While the data this summer has not been indicative of a robust USA economic recovery, and actually were dismal at the bottom, the recent uptrend is encouraging. "After a brief plunge in the late spring, the WLI has been fairly stable throughout the summer and into September, suggesting that it is still premature to predict a new recession," said Lakshman Achuthan, managing director of ECRI.

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USA Weekly Unemployment Claims at 3 Week High (Charts) *Total Claims 465,000*

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United States Department of Labor: Unemployment Insurance Weekly Claims Report

USA Weekly Unemployment Claims at 3 Week High

Official Statement The Department of Labor reported, "In the week ending Sept. 18, the advance figure for seasonally adjusted initial claims was 465,000, an increase of 12,000 from the previous week's revised figure of 453,000. The 4-week moving average was 463,250, a decrease of 3,250 from the previous week's revised average of 466,500. The advance seasonally adjusted insured unemployment rate was 3.5 percent for the week ending Sept. 11, a decrease of 0.1 percentage point from the prior week's revised rate of 3.6 percent."

Cycle History Weekly unemployment claims for the week ended September 18, 2010 are down -186,000 and -28.6% from the Great Recession peak of 651,000 for the week ended March 28, 2009. The current unemployment claims are up +38,000 and +8.9% from the subsequent low of 427,000 for the week ended July 10, 2010. Therefore, current claims are closer to the cycle bottom than the peak.

Trend This is the first increase (+12,000) in weekly unemployment claims since the 2010 peak of 504,000 for the week ending August 14 (5 weeks ago). The current claims of 465,000 are above the 4-week moving average of 463,250, and also below the 13-week and 52-week moving averages of 468,692 and 475,346. The current claims are above the 26-week moving average of 464,231. Weekly claims had previously remained below the 4-week moving average since the 2010 peak of 504,0000 for the week endied August 14 through September 11. Therefore, weekly unemployment claims are mostly trendless recently and within a range with a peak of 504,000 and trough of 427,000.

Chart (4-Week Moving Average) The chart below shows the 4-week moving average for the last 52 weeks (1 year) of weekly total unemployment claims, from the week ended September 26, 2009 through the latest week reported, September 18, 2010. The 4-week moving average is considered a better, smoother metric. The 4-week moving average dropped significantly to reach a first low of 462,500 for the week ended January 9, 2010. After an increase, another low was set of 448,000 for the week ended March 27. This has been the Great Recession cyclical low to-date.

Chart (Weekly Unemployment Claims) The chart below shows the total weekly unemployment claims for the last 52 weeks (1 year) from the week ended September 26, 2009 through the latest week reported, September 18, 2010. A general decline in claims is indicated, with a recent peak of 504,000 reached for the week ended August 14, 2010 and a Great Recession low of 427,000 reached for the week ended July 10, 2010 which has been the cyclical low to-date.

Commentary The 4-week moving average has now decreased 4 consecutive weeks from the 2010 peak of 488,000 for the week ended August 21, which is encouraging. Weekly claims, after reaching a peak of 504,000 (which was the first time greater than 500,000 since the week ended November 14, 2009) claims have become trendless - staying within a range with a peak of 504,000 and trough of 427,000. Obviously claims at the 500,000 level is a benchmark, as is the 400,000 level. Weekly claims have not been below 400,000 for over 2 years, since the week ended July 12, 2008 claims of 385,000. Weekly claims first dropped below 500,000 in this Great Recession Cycle for the week ended November 21, 2009 at 477,000. So recent weekly claims have been in this range since November 21, 2009 with only one exception. Claims over 500,000 clearly indicate GDP growth is slowing, if not stalling, while claims less than 400,000 indicate a decent economic recovery is underway. Hence the uncertainty over the pace of the USA economic recovery.

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Global Services PMI at 6 Month Low (Chart) *Growing at Slower Rate in August*

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Global Services PMI Dips -0.8%

Global Services PMI at 6 Month Low, Growing at Slower Rate

Official Statement The JPMorgan statement about the August 2010 Global Services PMI: "The recovery in the global service sector slowed again in August. The JPMorgan Global Services Business Activity Index fell to a six-month low of 53.5, down further from April's 33-month high, but nonetheless signalled expansion for the thirteenth month running."

The JPMorgan Global Services PMI (Purchasing Managers' Index) decreased -0.8% to 53.5 in August. This was the fourth consecutive monthly decrease since the April 2010 peak of 56.8. The August -0.8% decrease followed the three previous declines of -0.6%, -1.4%, and -0.5% in July, June, and May, respectively.

David Hensley, Director of Global Economics Coordination at JPMorgan, said: "Although the August PMI data showed that the global service sector recovery continued, growth of activity lost further momentum, new business rose at the weakest rate in the year-to-date and job losses were reported for the first time since March. It looks as if service providers and their clients remain somewhat cautious about the economic outlook, suggesting that the slowdown may be set to continue in the coming months."

Cycle History The data on the chart below is limited to the latest 13 months ending August 2010. The August Global Services PMI is down -3.3 and -5.8% from the intermediate-term peak of 56.8 in April 2010. The current PMI is up +3.2 and +6.4% from the intermediate-term bottom of 50.3 in November 2009. Therefore, the current August 2010 Global Services is about mid-range from the recent top and bottom.

Trend The August Global Services PMI of 53.5 has now just barely dropped below the 12-month moving average of 53.6. Since the peak in April 2010, each month has been lower now for 4 consecutive months (May through August). However, any value over 50 indicates expansion so the growth continues at a slower pace.

Chart (Global Services PMI) Below is a chart of the latest 13 months of the Global Services PMI from August 2009 through the latest month reported, August 2010. The PMI has been greater than 50, indicating global services are expanding, since August 2009 - 13 consecutive months. The PMI peaked in April 2010 at 56.8. Four consecutive monthly declines have ensued through this latest August 2010 decline. However, the four consecutive monthly declines still indicate global services are expanding, just at a slower rate.

About The PMI The Global Report on Services is based on the results of surveys covering around 3,500 executives carried out in the USA by ISM, and in Japan, China, the UK, Germany, France, Spain, Italy, Brazil, India, Russia, Ireland and Hong Kong by Markit, in Australia by AiG, New Zealand by Business NZ and Mexico by HSBC. These countries together account for an estimated 80% of global service sector output. For the US, data are taken from the ISM non-manufacturing survey which, in addition to the service sector included in the other countries, also includes agriculture, construction, mining, public administration, retail, utilities and wholesale sectors. The Hong Kong PMI also covers construction, manufacturing and retail. Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease. 50.0 = no change level.

Data sources: Country % share of global GDP
United States 28.8
EuroZone 17.7
Japan 12.8
China 6.5
Germany 5.2
United Kingdom 4.3
France 3.8
Italy 2.9
Brazil 2.1
India 2.0
Spain 1.8
Mexico 1.7
Australia 1.3
Russia 1.1
Hong Kong 0.6
Ireland 0.3
New Zealand 0.2


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*Data courtesy of the Institute for Supply Management & JPMorgan*


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USA Consumer Sentiment Drops to 13 Month Low (Chart) *August preliminary 66.6*

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Thomson Reuters/University of Michigan: USA Consumer Sentiment Lowest Since August 2009

USA Consumer Sentiment Dips to 13 Month Low

Official Statement (Reuters) "The Thomson Reuters/University of Michigan's preliminary September reading on the overall index on consumer sentiment came in at 66.6, down from 68.9 in August. 'Confidence edged downward in early September, as consumers judged prospects for the national economy less favorably,' the survey's director Richard Curtin said in a statement.

Cycle History Consumer Sentiment in September (preliminary) is down -30.1 and -31.3% from the intermediate-term peak of 96.9 in January 2007. In 2004 the index was > 100. The current sentiment is up +11.3 and +20.4% from the bottom of 55.3 in November 2008 (the all-time low).

Trend Consumer Sentiment plunged in July 2010 to 67.8 from 76.0 in June. Previously, sentiment had been above 70.0 since December 2009 - seven consecutive months. Current sentiment of 66.6 is below the 12-month, 24-month, and 36-month moving averages of 71.4, 67.3, and 67.8, respectively. Sentiment dropped below the 12-month moving average in July 2010, after being above since April 2009 (15 consecutive months). Sentiment had been above the 24-month moving average since July 2009, until dropping below in this month, September. Sentiment dropped below the 36-month moving average initially in July 2010 after being above since September 2009 (10 consecutive months).

Chart (Consumer Sentiment) Below is a chart of the latest 57 months of the Reuters/University of Michigan Index of Consumer Sentiment from January 2006 through the latest month reported, September 2010 (preliminary). As can be seen, the last sentiment peak was in January 2007 at 96.9, a decline ensued, and the latest bottom was in November 2008 at 55.3 (which also was an all-time low). The latest sub-peak was in June 2010 at 76.0. A change in trend to the downside has occurred since.

Commentary The Reuters/University of Michigan Index of Consumer Sentiment at 66.6 is below the recent June 2010 peak of 76.0 and well below the January 2007 intermediate-term peak of 96.9. Current sentiment is disappointing after the increased optimism of late spring and early summer. I personally believe the partisan, divisive political campaign hyper-rhetoric leading up to the November elections may be a factor in this September decline (just my opinion). Gallup reported this week, "Americans More Pessimistic About Emerging From Recession" and "U.S. Economic Confidence More Negative Than a Year Ago". The Conference Board will report their monthly Consumer Confidence Survey at the end of this month.

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USA Weekly Leading Index at 14 Week High (Charts) *Annualized Growth Rate -9.2%*

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Weekly Leading Index: Is the USA Economy Bottom Bouncing?

USA Economic Weekly Leading Index at 14 Week High

Overview The USA Economic Weekly Leading Index rose to a 14 week high of 122.6 for the week ended September 10, 2010. This is the highest the WLI has been since 122.7 for the week ended June 14. This is an increase of +0.6 from the previous week WLI of 122.0.

Cycle History The WLI for the week ended September 10 is down -12.1 and -8.9% from the peak of 134.7 for the week ended April 3, 2010. The current WLI is up +2.2 and +1.8% from the bottom of 120.4 for the week ended July 16, 2010.

Trend The WLI has increased for two consecutive weeks now. The WLI of 122.6 is above the 13-week moving average of  121.2 for the second consecutive week. The WLI continues below the 26-week moving average of 125.2 for the 18th consecutive week. The WLI continues below the 52-week moving average of 127.4.

Chart (Weekly Leading Index) Below is a chart of the latest 52 weeks (1 year) of the ECRI Weekly Leading Index, from the week ended September 18, 2009 through the latest week reported, September 10, 2010. As can be seen, the WLI peaked in late April 2010, declined significantly, and now appears to be bottom bouncing. The latest WLI, a 14 week high of 122.6, could potentially be a change in trend to the upside. Concomitant with the WLI decline this summer has been USA GDP growth being revised downwards for the second half of 2010.

USA WLI Annualized Growth Rate at 11 Week High

Overview The WLI Annualized Growth Rate (AGR) was -9.2% for the week ended September 10, 2010, an 11 week high, the second consecutive weekly increase, and a rise of an impressive +0.9. This is the largest weekly increase since the week ended October 2, 2009, in 50 weeks!

Cycle History The AGR for the week ended September 10 is down -37.0 and -133.1% from the peak of +27.8% for the week ended October 9, 20009. The current AGR is up +1.8 and +16.4% from the bottom of -11.0% for the week ended July 23, 2010.

Trend The AGR has increased for two consecutive weeks and 5 of the last 6 weeks. This was after 12 consecutive weekly declines from the week ended May 7, 2010 to the week ended July 23, 2010.

Chart (Annualized Growth Rate) Below is a chart of the latest 52 weeks (1 year) of the ECRI WLI Annualized Growth Rate, from the week ended September 18, 2009 through the latest week reported, September 10, 2010. As can be seen, the annualized growth rate peaked at +27.8% in early October 2009 and began a decline with intermittent leveling off. A negative growth % was reached in early June 2010 and the rate has remained negative since.

Commentary The Weekly Leading Index projects forward approximately 6 months and the Annualized Growth Rate is relative to the WLI. That is, the overall higher WLI in 2010 mitigates some of the recently negative AGI. The WLI is off the bottom reached in mid-July and is in a recent uptrend. The AGR is also off the bottom reached in late July and has recently uptrended. While the data this summer has not been indicative of a robust USA economic recovery, and actually were dismal at the bottom, the recent uptrend is encouraging.

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USA Weekly Unemployment Claims at 9 Week Low (Charts) *Total Claims 450,000*

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United States Department of Labor: Unemployment Insurance Weekly Claims Report

USA Weekly Unemployment Claims at 9 Week Low

Official Statement The Department of Labor reported today, "In the week ending Sept. 11, the advance figure for seasonally adjusted initial claims was 450,000, a decrease of 3,000 from the previous week's revised figure of 453,000. The 4-week moving average was 464,750, a decrease of 13,500 from the previous week's revised average of 478,250."

Cycle History Weekly unemployment claims for the week ended September 11, 2010 are down -201,000 and -30.9% from the Great Recession peak of 651,000 for the week ended March 28, 2009. The current unemployment claims are up +23,000 and +5.4% from the subsequent low of 427,000 for the week ended July 10, 2010.

Trend Weekly unemployment claims have not increased in the past 4  weeks, since the 2010 peak of 504,000 for the week ending August 14. The current claims of 450,000 are below the 4-week moving average of 464,250, and also below the 13-week, 26-week, and 52-week moving averages of 467,692, 463,192, and 476,615, respectively. Weekly claims have remained below the 4-week moving average since the 2010 peak of 504,0000 for the week ending August 14.

Chart (4-Week Moving Average) The chart below shows the 4-week moving average for the last 52 weeks (1 year) of weekly total unemployment claims, from the week ended September 19, 2009 through the latest week reported, September 11, 2010. The 4-week moving average is considered a better, smoother metric. The 4-week moving average dropped significantly to reach a first low of 462,500 for the week ended January 9, 2010. After an increase, another low was set of 448,000 for the week ended March 27. This has been the Great Recession cyclical low to-date.

Chart (Weekly Unemployment Claims) The chart below shows the  total weekly unemployment claims for the last 52 weeks (1 year) from the week ended September 19, 2009 through the latest week reported, September 11, 2010. A general decline in claims is indicated, with a recent peak of 504,000 reached for the week ended August 14 and a recent low of 427,000 reached for the week ended July 10, which has been the cyclical low to-date.

Commentary The 4-week moving average decreased -13,500 this week because the 2010 peak of 504,000 for the week ended August 14 dropped from the average. After reaching this peak of 504,00 (which was the first time greater than 500,000 since the week ended November 14, 2009) claims have been decreasing. Obviously claims at the 500,000 level is a benchmark, as is  the 400,000 level. Weekly claims have not been below 400,000 for over 2 years, since the week ended July 12, 2008 claims of 385,000. Weekly claims first dropped below 500,000 in this Great Recession Cycle for the week ended November 21, 2009 at 477,000. So the 450,000 claims the week ended September 11 is squarely in the middle of the range perceived as increasing GDP growth and decreasing GDP growth: 400,000 and 500,000 respectively. Hence the uncertainty over the pace of the USA economic recovery.

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USA Monthly Sales for Retail & Food Services Up +0.4% in August (Chart) *$363.7B Highest Since April*

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USA monthly retail sales increased +$1.515 billion in August

USA Monthly Sales for Retail & Food Services Up +0.4% in August

Official Statement The U.S. Census Bureau and U.S. Department of Commerce reported today the USA monthly retail sales for August and stated, "The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for August, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $363.7 billion, an increase of 0.4 percent (±0.5%) from the previous month, and 3.6 percent (±0.5%) above August 2009. Total sales for the June through August 2010 period were up 4.7 percent (±0.3%) from the same period a year ago. The June to July 2010 percent change was revised from +0.4 percent (±0.5%) to +0.3 percent (±0.2%). Retail trade sales were up 0.5 percent (±0.5%) from July 2010, and 3.7 percent (±0.7%) above last year. Nonstore retailers sales were up 10.5 percent (±2.8%) from August 2009 and gasoline stations sales were up 9.6 percent (±1.8%) from last year."

Cycle History USA monthly sales for retail & food services in August are down -$16.256 billion and -4.28% from the peak of $379.960 billion in November 2007. The August sales are up +$28.090 billion and +8.37% from the bottom of $335.614 billion in December 2008.

Trend USA monthly sales for retail & food services were up +$1.515 billion and +0.417% from July and increased for the second consecutive month.. Sales have increased 6 of the 8 months in 2010 for a net increase of $9.606 billion for the year. The August sales of $363.704 billion continue above the 12-month moving average of $357.660 billion and have remained above since August 2009 (13 consecutive months).

Chart Below is a 69 month chart of USA sales for retail & food services from December 2004 through the latest month reported, August 2010. USA. Sales peaked in November 2007 at $379.960 billion, began downtrending in July 2008 at an increasing rate. The bottom was in December 2008 at $335.614 billion. The recent peak was in April 2010 at $365.997 billion.

Commentary As can be seen from the chart, USA monthly sales for retail & food services recently peaked in April 2010 and the August data has not yet regained this level. The cyclical peak was in November 2007 and a sharp decline began in July 2008.which bottomed in December 2008. A general uptrend ensued until April 2010 and the USA economy entered a slower rate of growth in general beginning in May and June. Since consumer spending, consumption is a significant portion of the USA economy (60%+ of GDP), this pullback in retail sales slows down USA economic (GDP) growth.

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USA Total Consumer Credit Decreases in July (Charts) *6th consecutive monthly decline*

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USA revolving credit in July decreased for 23rd consecutive month

USA Total Consumer Credit Decreases in July

The Federal Reserve reported the July USA consumer credit data on September 8 and stated, "In July, total consumer credit decreased at an annual rate of 1-3/4 percent. Revolving credit decreased at an annual rate of 6-1/4 percent, and nonrevolving credit increased at an annual rate of 1/2 percent."

USA total consumer credit decreased for the 6th consecutive month, the last monthly increase was January 2010. However, there had been eleven consecutive monthly decreases prior to January 2010. This was the 23rd consecutive monthly decline in revolving credit. The last monthly increase was in August 2008. Nonrevolving credit increased for the 3rd consecutive month, but the increases have not offset the revolving credit decreases.

As can be seen from the charts below of USA Total Consumer Credit, Total Revolving Credit, and Total  NonRevolving Credit, consumer debt peaked in July and August 2008 (The Great Credit Bubble) and has downtrended since. The decrease in revolving credit has been much greater than the decrease in nonrevolving credit. While reports say consumers are deleveraging, i.e. paying off their debt, it should also be noted that banks have tightened lending standards. Therefore, some consumers who could  have borrowed (and spent) as recently as the first half of 2008 cannot obtain credit in 2010. In addition, consumer uncertainty regarding the future plus the current high unemployment and underemployment rates have lowered loan demand. Since consumer spending, consumption is a significant portion  of the USA economy (60%+ of GDP), all of these factors slow down the USA economic (GDP) growth.

Below is a 68 month chart of USA Total Consumer Credit from December 2004 through the latest month reported, July 2010. Total Consumer Credit peaked in July 2008 at $2.582 trillion, began downtrending, and now is $2.419 trillion in July 2010. This is a -$162.99 billion, -6.33% decrease from the July 2008 peak to July 2010.

Below is a 68 month chart of USA Total Revolving Credit from December 2004 through the latest month reported, July 2010. Total Revolving Credit peaked in August 2008 at $973.6 billion, began downtrending, and now is $827.8 billion in July 2010. This is a -$145.8 billion, -14.976% decrease from  the August 2008 peak to July 2010.

Below is a 68 month chart of USA Total NonRevolving Credit from  December 2004 through the latest month reported, July 2010. Total NonRevolving Credit peaked in July 2008 at $1.609 trillion, decreased somewhat, leveled off, and now is $1.591 trillion. This is a -$18.25 billion, -1.14% decrease from the July 2008 peak to July 2010.

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USA Weekly Leading Index Rises to 4-Week High (Charts) *Annualized Growth Rate -10.1%*

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Weekly Leading Index: Is the USA Economy Bottom Bouncing?

USA Economic Weekly Leading Index at 4-Week High

The USA Economic Weekly Leading Index rose to a 4-week high of 122.0 for the week ended September 3, 2010. This is an increase of +1.5 from the previous week revised WLI of 120.5. This was the largest weekly increase since the +1.0 for the week ended April 30. The lowest the WLI has been in 2010 was 120.4 for the week ended July 16. The highest was 134.7 for the week ended April 30.

Below is a chart of the latest 52 weeks (1 year) of the ECRI Weekly Leading Index, from the week ended September 11, 2009 through the latest week reported, September 3, 2010. As can be seen, the WLI peaked in late April 2010, declined significantly, and now appears to be bottom bouncing. Concomitant with this WLI decline has been the GDP growth slowing, as reviewed and charted here, in a previous post, "USA Q2 GDP Revised Downward to 1.6% (Chart)".

The 13-week, 26-week, and 52-week moving averages of the WLI are now 121.2, 125.6, and 127.5, respectively. The current WLI of 122.0 rose above the 13-week moving average, but is still below the 26-week and 52-week moving averages. The WLI peaked at 134.7, for the week ended April 30, 2010, and the plunge seen on the chart below then occurred.

USA WLI Annualized Growth Rate -10.1%

The WLI annualized growth rate was -10.1% for the week ended September 3, 2010, an rise of +0.1. The prior week ended August 27 was revised to -10.2% from the originally reported -10.1%. The 2010 annualized growth rate low point was -11.0% for the week ended July 23 and the high point was +23.0% for the week ended January 1.

Below is a chart of the latest 52 weeks (1 year) of the ECRI WLI Annualized Growth Rate, from the week ended September 11, 2009 through the latest week reported, September 3, 2010. As can be seen, the annualized growth rate peaked at +27.8% in early October 2009 and began a decline with intermittent leveling off. A negative growth % was reached in early June 2010 and the rate has remained negative since.

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*Data courtesy of the Economic Cycle Research Institute*


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