Written by Steven Hansen,
Sea container imports continue to indicate a weak (but possibly improving) U.S. economy. On the other hand, the rate of growth for export containers improved this month – with year-over-year growth (comparing April 2018 to April 2019) deep in expansion. Export growth generally correlates with the global economy.
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Imports correlate with the growth rate of the U.S. economy. In 2019, import sea container growth significantly slowed. The graph below shows the rate of change for year-over-year import container growth relative to the previous month.
The bar chart above shows two months of improving import growth following the trend low point in February 2019 (the declining trend began in early 2018).
Another interesting data release this past week was retail sales for which the headlines say year-over-year growth declined whilst our analysis differs. We use retail sales in one of the special indicators to gauge the economy – and this indicator remains mired in negative territory. When retail sales grow faster than the rate of employment gains (above zero on the below graph) – a recession is not imminent. Although this index has many false recession alarms, there is no doubt that its venture into negative territory indicates a weak economy.
Growth Relationship Between Retail Sales and Non-Farm Private Employment – Above zero suggests economic expansion
As I continue to point out, there are many signs of a slow-growing economy – but no sign that a recession would manifest in 2019.
Economic Releases This Past Week
The Econintersect Economic Index for May 2019 long term decline began in July 2018 – and continued this month after last month’s marginal improvement. This forecast flies in the face of the continuing improvement trend of Real GDP. There currently is a disconnect between GDP and the Econintersect Economic Index. Part of the reason is that GDP adjusts for trade, and we believe imports are an essential element of economic activity on Main Street. Further, GDP believes economic activity includes inventory, whilst Econintersect ignores inventory. If imports and inventory were ignored – GDP growth would have been less than half of the headline number.
The following table summarizes the more significant economic releases this past week. For more detailed analysis – please visit our landing page which provides links to our complete analyses.
| Release | Potential Economic Impact | Comment |
|---|---|---|
| April Sea Container Counts | shows slow economic growth | The April year-to-date import/export container count growth rate improved from last month, and the year-over-year growth (comparing April 2018 to April 2019) remain is in expansion. Simply looking at this month versus last month – this was a stronger month for exports and a marginally weaker month for imports. The rate of growth slowed for imports and increased for exports. The three-month rolling averages for exports and imports improved but both are in contraction. Imports container counts give an indication of the U.S. economy’s state and the soft data continues to indicate a weak economy. Exports are saying the global economy is weak as well. Container data is consistent with other transport data indicating a weak economy.
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| April NFIB Small Business Optimism | relatively high confidence | The NFIB Small Business Optimism Index increased 1.7 points to 103.5. Sales improved in April, the inventory soft spot seen in last month’s report rebounded, and profit trends posted a very solid advance. Job creation plans gained, hiring remained strong, and expectations for sales, business conditions, and credit conditions all improved.
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| April Export-Import Prices | marginal | Year-over-year import and export prices declined. Import and export pricing has remained relatively constant this year with little change. Year-over-Year Change – Import Prices (blue line) and Export Prices (red line)
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| April Retail Sales | improvement | Retail sales declined according to US Census headline data. The three-month rolling average improved, and the downward trend in the data seems to have been broken.
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| April Industrial Production | manufacturing in contraction | The headlines say seasonally adjusted Industrial Production (IP) declined month-over-month. Our analysis shows the three-month rolling average declined. There was a downward revision to the last 6 months of data. The best way to view this is the 3-month rolling averages which declined. Industrial production remains in a downtrend. Note that manufacturing is in contraction year-over-year.
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| March Business Sales and Inventories | continues to slow | Headlines show final business sales data (retail plus wholesale plus manufacturing) improved. However, the rolling averages declined. Inventories remain very elevated. Inflation-adjusted growth is in contraction. Overall business sales are better than the low point in 2015 – but over the last 6 months growth is trending down.
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| March Housing Starts | marginal | The headline residential building permits improved and construction completions slowed relative to last month. Overall this data was near expectations. The nature of this industry normally has large variations from month-to-month (mostly due to weather) so the rolling averages are the best way to view this series. In summary, the rolling averages say this sector is expanding this month. We consider this report better than last month but still the growth is relatively slow.
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| April Conference Board Leading Indicator | year-over-year growth continues to slow | The Conference Board Leading Economic Index (LEI) for the U.S improved this month – and the authors say “economic growth to moderate toward 2 percent by year-end”. But the graph below tells the real story where the year-over-year index growth (blue line) continues to slow:
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| Surveys | none | Empire State Manufacturing – The Empire State Manufacturing Survey index improved and remains in expansion. Overall this survey is now in mid-range of values seen in the last two years.
Philly Fed Manufacturing – The Philly Fed Business Outlook Survey improved and remained in expansion. Key elements remained in positive territory. Although the survey index improved, the key element sales again declined while unfilled orders insignificantly improved. Overall, I do not consider this survey much different than last month.
Michigan Consumer Sentiment – The preliminary University of Michigan Consumer Sentiment for May came in at 102.4 – up from the April final of 97.2, and UP from the March final of 98.4.
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| Weekly Rail Counts | Definitely not positive news | Rail so far in 2019 has changed from a reflection of a strong economic engine to contraction. Currently, not only are the economic intuitive components of rail in contraction, but the year-to-date has slipped into contraction.
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Links To All Of Our Analysis This Past Week
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