When the AAII Investor Sentiment Survey went bullish over 50% again, a little deja vous set in. This is a forward looking index which measures members who are bullish, bearish, and neutral in their six month outlook.
Going back a little more than a year, we were at this 50% bullish sentiment point.
The market was higher six months later. Going back further in time to the next to last time the AAII sentiment hit 50:
This time investor sentiment missed the mark big time.
The Thomson Reuters / University of Michigan preliminary index for September 2010 was released this week showing consumer sentiment dropped to 66.6 following a reading of 68.9 in August.
Try to match the movement of this survey to anything – equities, interest rates, political, asset accumulation, unemployment, wages. The value of this survey to forecasting anything is limited.
Data This Week
The analysis of this week’s data continued to find the seasonal adjustment factors are not working properly. In most cases, a particular conclusion can be drawn if you compare the current data to pre-Great Recession data. However, if you compare the data to New Normal, a different conclusion can be drawn.
The hyperlinks in the table below go to the background analysis.
Weekly Economic Release Scorecard:
| Headline | Analysis | ||
| Retail Sales | Increase 0.4% | Decrease | |
| Business Sales | Increase 0.7% | No Increase | |
| Shipping Container Counts | Imports Up / exports down | ||
| Ceridian-UCLA Pulse of Commerce Index | Down 1% | Unchanged | |
| Empire State Manufacturing Survey | Growing at slower rate | Growing slightly | |
| Industrial Production | Rose 0.2% | Fell 1% | |
| Philly Fed Business Survey | Flat | Growing slightly | |
| PPI | Up 0.4% | Flat | |
| CPI | 0.30% | 0.10% |
The largest and most important discrepancy came from Industrial Production (IP) where the analysis shows manufacturing fell 1%. Here, the sea container export shipping counts for August 2010 fell YoY which validates our view of weak IP. The trend lines are very weak pointing to a lull of growth in manufacturing in this current cycle.
Last week’s initial unemployment claims were suspect due to lack of reporting because of the Labor Day weekend. This week’s release shows the DOL did a good job of estimating last week (only revised up 3,000), and this week’s initial claims number is essentially unchanged. The four week moving average, the primary number I follow, fell significantly. Despite this significant movement, initial unemployment claims has remained in a tight range in 2010.
The Economic Forecast
The data this week is consistent with the slow growth forecast and continuing decelerating growth. The rate of economic deceleration remains steady, and if this deceleration remains constant – points to a double-dip in six months. Note that it is unlikely that any movements (up or down) would remain constant based on historical movements.
The Weekly Leading Index from ECRI improved slightly to -9.2 from -10.1 to a 14 week high. It still remains in the territory where recessions historically occur.
Bankruptcies filed this week: Java Detour
[...] [Note: This article was originally published with hyperlinks to background or source data. To view the article with hyperlinks click here.] [...]