Monday, June 29, 2015

Is There A Hole In Our Pocket?

“Now I've got a hole in my pocket, a hole in my shirt, a whole lot of trouble, he said

But now the money is gone, life carries on and I miss it like a hole in the head” 

(Passenger – Michael David Rosenberg)

When gas prices fell dramatically last fall, I enthusiastically predicted it would be a big boost to the economy with more than $70 billion, yeah $70 BILLION, in added consumer spending flowing into the system.  And I even thought the impact would be greater than normal due to the psychological boost it would provide to consumers.  Why did I believe this? Because in the past a drop in gas prices usually produced the same impact as a tax cut and consumer spending increased.

Well welcome to the 2010’s where you can’t rely on some types of historical data to forecast the future.  I have been claiming since 2010 that certain past reliable economic indicators are broken and are still unreliable.  And even then I have made at least two inaccurate predictions in the past year that were based on “rock-solid” history. Those rocks are now crushed stone.

Retail sales have been moderate and inconsistent at best since October and that “huge” economic boost equated to a negative GDP in Q1. So what the heck happened here?

It was expected that weaker crude oil prices would hurt the energy industry, however economists did not think crude would go so low and stay depressed for this long.  It turns out that the energy markets were a significant growth engine for the entire economy and fueling considerable ancillary spending. Once the air was let out of that balloon, the economy began to stall.

However, the bigger question is: What happened to all this money the consumer pocketed from lower gas prices? If we didn’t spend it, where did the money go?  Here is the speculation:

We Saved It
Some economists speculate that the savings rate has increased since the Great Recession.  There were long lasting cultural changes regarding saving and spending following the Great Depression, so the thinking is people’s attitude and behavior have changed due to going through the Great Recession and they are managing their money more responsibly.

I’m not really buying into this one.  This is probably true for a small segment of the population, but I still believe this is a consumption-crazed society and it will take more than just a recession to change that.

We Don’t Think It Will Last

Consumers aren’t spending the windfall because they don’t expect gas prices to stay low.  And to a certain extent they are correct.  The average gas price is now $2.82/gal up from the low point of $1.98, but still 90¢ lower than a year ago.  So maybe this money will be spent on something in the future, but not now.  Technically it is “savings”, but functionally it is delayed spending. Regardless, it’s not being spent.

Nervous Consumers

There have been surveys showing people are getting more nervous about losing their jobs.  This is perplexing based on the fairly positive jobs data this year.  Maybe it was the announcements of future job cuts by some large corporations at the beginning of the year which spooked people.

Regardless, the gas savings has not made consumers more confident.  The UM Consumer Confidence Index was 94.1 in October and only 96.1 now.   It did grow at the beginning of the year but has moderated since.  Likewise the Gallup Economic Confidence Index was -13 in October and -9 now.  If consumers are not confident about the future, they don’t spend money in the present.

Wealthier Consumers Are Not Purchasing Luxury Items

There have been articles detailing this trend.  People were spending recklessly before the recession and now could be reverting to more normal patterns.  After everything that has happened and the derision of the “rich” in the news/political arena, conspicuous consumption is not as valued as it had been.

The Costs of Healthcare Are Increasing

There have been numerous articles and analyses done on the increased costs associated with healthcare. Forget about the cases where the cases where someone’s premium goes up 80%, consider a more normal case where someone’s premium went up $20 a month and their deductible increased by a $1000 at the start of 2015.  Throw in some higher co-pay fees and lower reimbursements for services by your insurance company.

The Affordable Care Act may be far from affordable for most people.  I believe almost everyone was impacted by it.  The insurance companies and doctors are not going to make less money, so they figured out ways to extract more money from the people who already had insurance.  I know I am paying more.  My family used to hit our deductible around May, now we never hit it. I am writing small to moderate checks the entire year for medical bills.

That may have been the plan all along. For people to write “absorbable” checks every month so they don’t realize how much more they are really spending.  The problem is all the “micro-checks” when added together can cause a macro impact on the economy.  Add this impact with the employment issues (29 hour work week, 50 employee small business clause) and the Affordable Care Act may turn out to be a huge drain on economic growth.

That means in January, just about the time people were getting ready to spend their gas dividend (economists say there is about a two month lag from when gas prices fall), their healthcare costs increased, wiping out that savings.  It means we tried to pocket the savings, but there was a hole in this pocket.


Economists calculate the average household savings on lower gas prices will be about $700.  If you spend an additional $700 on healthcare during the year, you break even. If your healthcare costs rise more, you lose.  Increased healthcare costs may be reason for disappointing retail sales in 2015 and may have contributed to the weak Q1 GDP. 

It may have been a fortunate coincidence that consumers got more money from gas savings just as they were required to pay more money for healthcare.  However, we may not be nearly as fortunate if gas prices rise back to previous levels just as the 2016 healthcare increases hit.


“Now I've got a hole in my pocket, a hole in my shirt, a whole lot of trouble, he said

But now the money is gone, life carries on and I miss it like a hole in the head

This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

Thursday, June 11, 2015

Mixed Signals in the Economy Cause Uncertainty Everywhere

The economy continues to send mixed signals.  You look at some indicators and things look good. However, other important indicators signal doom is right around the corner.  It is a mixed-bag; it is mumbo-jumbo; it is a dog’s breakfast of economic proportions.

But how does this uncertainty play out in real industries?  What problems is it causing? How can companies plan under these circumstances? Have the extended, long-lasting, low interest rates created any bubbles?

The commercial vehicle market displays some of these peculiarities.  Even though the economy has not experienced its typical cycles since 2011, this industry has been performing in a somewhat typical cycle for the past few years.  This market is approaching the peak and should get there late this year.  So as the economy stalls, business is still booming, but for how long?

Here is an analysis of the current state of the commercial vehicle market:

Order rates in both Class 8 and Commercial Trailer markets have started to weaken after achieving sky-high levels at the end of 2014.  Backlogs have peaked for this upcycle and started their decent. The big question now: when does production start to fall?  It is a very interesting question, because production is increasing at the same time orders are falling. 

However, there are significant economic factors to be concerned about.  The economy has temporarily stalled out and is expected to show almost no growth for the first half of the year.  No big “snap back” is expected in the second half of the year either.  The slowdown in the industrial sectors of the economy impacts freight growth, of course, and the forecast for truck freight has been lowered for the year.

Weakening freight demand and declining orders would almost always result in lower equipment forecasts, but the situation is complicated by the huge backlogs.  OEMs have many orders booked for Q3 and Q4, the result of the deluge of orders received from September 2014 through January 2015.  Backlogs are strong enough to support the production forecasts even if orders fall to traditional low levels this summer.  The current forecast assumes that production will remain near current levels for the rest of the year.

The key question now is: how solid are these backlogs?  This is important because most of the orders for delivery in Q3 and Q4 were placed 8-12 months in advance to reserve scarce build slots at the OEMs.  The OEMs had “right-sized” after the Great Recession meaning there was less industry capacity to handle the peak of the current upcycle. 

Fleets were anticipating a continued strong, growing economy when they placed these orders; however, based on the current economic reports, things may be much different.  Two months ago, OEMs were very confident that the orders were “real,” “solid,” and would be built.  Now they are hoping that this will be the case.
What happens this time after you reach the peak?

OEMs made rational decisions to “lock up” future build slots with these so-called “place-holder” orders, since there is no penalty for future cancellations.  However, based on the current economic forecasts, these orders become more tenuous every day.  There is the possibility that all the new equipment being put into service over the next few months will create enough extra capacity that all those units on order may not be needed.  Unfortunately, the industry has experienced this situation before during economic downturns.

It is expected the great majority of these orders will, in fact, be produced. However, the possibility exists that some of these orders could be cancelled, or, more likely, moved out for delivery in 2016.  It is an uncertain backlog, in an uncertain economy.  It will be interesting to see how this mixed bag falls out.

Conclusion:

I know other industries have to be experiencing unique situations, even six years after the Great Recession.  It is my contention that the recession continues to impact business and consumers significantly, in ways it will take economists maybe decades to understand.

This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

Monday, June 1, 2015

It’s Starting To Feel A Little R-wordy

It’s time to discuss the R-word.  The R-word is the economic equivalent of those other “letter defined” words that you cannot say.  That’s because talking about the R-word is unpleasant, distasteful and is not suitable for speculation in esteemed economic circles.

That being stated, it’s beginning to feel a little R-wordy.  I say feel because you can’t really see an R-word coming and neither can you hear it.  It invades the economy like a bad cold virus. It does its work in secret, much below the radar, until it becomes burdensome to everyone. 

When R-words occur everyone is so surprised.  How could this have happened?  Why didn’t anyone see this coming?  But you seldom do. R-words actually begin months before they are discovered. They are similar to cheating lovers suddenly being revealed. Again there is much shock, outrage, and despair, when an R-word is uncovered.

So R-words are only felt, sensed, and detected by intuition before their arrival.  And it feels very R-wordy right now.  Q1 GDP is currently estimated at negative 0.7%.  Because the technical definition of the R-word is two consecutive quarters of negative growth, if Q2 GDP is negative, we have an R-word.   Provided Q2 is again just slightly negative and growth resumes in Q3, it would be one of the weakest R-words on record. 

Just heard someone say the R-word!
If this is the bottom of the economic cycle and the economy began growing again, this would be a good thing.  However, there is a psychological element to R-words and headlines such as “U.S. Economy Goes Into (R-word)” could cause disruptions in consumer spending and the stock market.

Some economists claim weak Q1 GDP was a result of bad weather and the West Coast Port strike.  These had an impact but not as much as you might think.  The biggest impact of the weather was in the Northeast and it did not impact manufacturing much, unlike last year’s Polar Vortex.  In addition, economic data from the period during the strike show that the effect was limited in duration.  Other data suggest the economy had already started to slow down at the beginning of year and these addition factors hastened its decent. 

Therefore Q2 economic growth becomes critical.  How’s it looking? In a word, tenuous.  Current data on Retail and Wholesale Sales, Factory and Durable Goods Orders, Wholesale Inventories, Export Sales Growth and Import Prices are all flashing red. (To see the graphs and detailed explanation, click link at the end).  Of course there are other indicators, The Conference Board Leading Economic Index for one, that indicate there will be no R-word this year.  This is not an unusual occurrence, it remains a strange economic environment and some indicators have been inconsistent or unreliable since the Great Recession (word is permissible in the past tense only).

To try to figure this out, I called economist Pat.  I believe economist Pat is a brilliant economist because he and I almost always agree on almost everything.  I remember calling Pat in December of 2007 because I was feeling R-wordy and he said he was feeling it also – and that time we turned out to be correct.


So what does economist Pat say?  He believes Q2 GDP will come in between 1-2% positive.  Not a great quarter, but not that close to an R-word.  

The Economic Cycle Research Institute’s (ECRI) Weekly Leading Growth Index also says no R-word.  It crossed into negative territory last October, bottomed out between January and March, but now due to solid growth since then, is well in positive territory.

So now I do feel much better, but I still don’t feel that great ……


This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

Tuesday, May 5, 2015

R-E-S-P-E-C-T – What It Means To Trucking, Business and Everyone

“New Ways to Think about Driver Retention” was a topic discussed at last month’s Fleet Forum hosted by Heavy Duty Trucking and Fleet Owner magazines at the Mid-America Truck Show.  Attendees no doubt expected to hear about new ways to structure salaries and schedule routes, however a much different message was delivered.

Representatives from the four fleets, Ozinga Brothers (Chicago), Load One (Taylor, MI), Carbon Express (Wharton, NJ), and Southeastern Freight Lines, were very consistent in their thinking and approach on this topic.  They agreed that the most important aspect of driver retention is “respect”.

According to the panel, many fleets do not show enough respect to their drivers, and when drivers do not feel respected, they become frustrated and quit.  The fleets on the panel have acted to address this situation by developing programs and strategies to make their drivers feel more respected.
R-E-S-P-E-C-T
For example, one important element of providing respect is better communication.  One fleet instituted a process that makes sure the drivers are informed about all issues relevant to doing their jobs successfully.  Another has developed a two-way evaluation system so that drivers can communicate how well they believe their company is treating them.  A system where the drivers are consistently talking with the mechanic who services their truck was also presented.

While the concept of showing greater respect initially seems obvious, a “no-brainer” if you will, I think the issue is more pronounced than you might think.  Companies in general don’t show their employees enough respect.  This phenomenon is more obvious regarding truck drivers because the job is demanding; also, due to the driver shortage, turnover is high and employees can easily bounce from company to company.

This “respect gap” is largely a result of changes in our culture.  Society does not respect blue-collar, tradesmen, and factory workers the way it once did.  We value “smart work” much more highly than “hard work.”  We are working smarter, not harder, but we have forgotten that hard work is still important and should be valued by everyone.

The preference for “smart work” has its costs.  Precisely, it translates into around $1.2 trillion of student loan debt that millions of debtors are struggling to pay off. (Ask me again why the housing market is so weak.)  This equates to an astounding 6% of the overall national debt.  We convinced the Millennials that they had to go to college to be successful, and then threw tons of money at them for education to get degrees that are not currently in high demand in this economy.

This college-bias was highlighted recently when it was “revealed” that a current governor, who may be a presidential candidate, never (gasp), never (double gasp), graduated from college!  Articles were written (of course by journalists with college degrees) questioning his ability to run the country without the benefit of a full (he attended for three years) college degree.  I have no idea how this guy is actually running a state without a diploma on the wall.  Of course, this culturally driven lack of respect is harming our entire political process also.  

In another recent incident, a video was released showing a television sports reporter berating an employee of a towing company.  Part of the rant targeted the person’s lack of education and profession.  This lack of respect and college-bias would seem to be growing worse.

Another cost of this bias is that while people sit home with their new Sports Management degrees, unable to find jobs in their field and pay off the $30,000 college loan, good, skilled, manufacturing jobs remain unfilled.  This is also hurting the transportation equipment industry as OEMs try to find enough production workers to meet robust truck and trailer demand.  Spread this condition throughout all industries, and you have a misallocation of labor that is hindering economic growth.

Cultural norms are very difficult to change.  You may have heard the trendy saying, “treat the janitor with the same level of respect as the CEO.”  I guess it’s time to stop agreeing with the statement and start actually living it out.  Fleets need to respect their drivers more, companies need to respect their employees more, and we all need to respect each other more.

Addendum: Consider the events the last two weeks in Baltimore in the context of “respect”.  Regardless of how you view the situation, can we agree that if everyone involved showed more respect to everyone else involved, that maybe this incident would have turned out better for everyone?

This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)



Friday, April 17, 2015

Did the Economy Just Literally Run Out Of Gas?

The Federal Reserve of Atlanta made big news last week when it announced it lowered its forecast for Q1 GDP growth to 0%. Yeah, that’s zip, zero, nada, nothing!

Most economists had downgraded their forecasts, but this announcement still was a surprise. Commentators quickly blamed bad weather as the reason. As I have mentioned before, this year’s weather was extreme, but it did not disrupt manufacturing nearly as much as last year’s Polar Vortex.

There were piles of snow in the Northeast, but that would impact the service industries more than manufacturing. However, the ISM Non-manufacturing Index was at 56.5 before the bad weather and 56.5 after (with little variation in between), so the service sector couldn’t have been hit too hard.

The other factor in Q1 is the West Coast Port Strike. The strike was settled in February, but it caused finished product and component product disruptions before then and will continue to create issues through May. The impact is difficult to measure. Some plants did shut down for a couple days due to lack of parts. However, most manufacturers found ways to work around this issue, albeit at higher costs. So again, there is an impact, but not a significant one.

Economists who believe the weather and port problems are the reason for a weak Q1 predict a “snap back” in Q2. But the data doesn’t support this yet. The ISM manufacturing index for March was 51.5%, actually down from 52.9% in February. The Wall Street Journal Economic Survey Panel (March) is forecasting 3.0% for Q2, an improvement back to previous expectations but certainly not a snap back.

Let’s assume that the Wall Street Journal Panel Q1 forecast of 2.3% took into account the weather impact. We will subtract another 80 basis points due to the port strike. That gets us to 1.5% growth. If we assume the Atlanta FED forecast is correct, what caused the 1.5% to evaporate?
What has changed recently? What significant economic occurrence? What, what, what? Oh yes, crude oil prices, and thus gasoline prices, have plummeted.

But wasn’t that supposed to be a boon to the economy as an estimated $70-$100 billion dollars poured into consumer spending as disposable income grew? Except it hasn’t happened. Consumers are not spending the extra “gas savings” cash as freely as they did in the past. Why? What is different this time?

The Great Recession changed many things, including consumers’ attitudes. One week your job was going great, you were making good money, and running a big credit card balance. The next week you were unemployed, with no hope of finding a job quickly, and no chance of paying off your debts for a long time. After the Great Recession, people are more conservative with purchasing decisions and, this time, are not spending the gas savings windfall.

Of course when crude prices fell, economists warned that the economy would also take a hit due to reduced oil and gas exploration infrastructure and drilling. This part of the equation has come true, although actual production remains fairly steady.

Conventional wisdom would say that the energy industry is a small segment of the total economy and a slowdown in activity should have a limited impact. But what if the conventional wisdom is wrong? At times during this long recovery we have heard “the energy sector is the only area of high growth.” We have seen better job growth numbers, followed with the caveat of “most of these jobs are low-wage positions in the service sector, except for all the higher paying jobs in energy.” Perhaps it was the energy sector and the ancillary spending, jobs, and positive news that was driving the modest economic growth for the past few years. And now, there was an unexpected shock to this growth machine that is letting the air out of the growth balloon.


Remember that economists were confused by having a recovery which wasn’t led by housing; so what then was leading it, beyond energy? Also, we do know what happened when the economy, being led by a housing surge, albeit artificially generated, crashed due to an unexpected shock to that industry.

I’m going to predict that the energy slowdown is having a much bigger impact than anticipated. It is probably not responsible for the entire 1.5% drop mentioned previously; the stronger U.S. dollar is hurting exports, so this causes part of the drag.

How viable is the Atlanta FED 0% Q1 GDP forecast? The lowest forecast in the March WSJ poll was 1%. However, that forecast is from Brian Wesbury and Robert Stein from First Trust Advisors, L.P. And these guys are good. They write the First Trust Economics Blog – The Antidote to Conventional Wisdom, so naturally they are two of my favorite economists. And it looks like they were way ahead of the game on this one.

It would appear the engine of economic growth has literally run out of gas. Regardless of what caused the slowdown, the momentum has been lost. Unfortunately, it appears it will be much harder to regain traction this time.

This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)


Friday, April 3, 2015

Freight Markets Are Good - But Not Great

At FTR (Freight Transportation Research), we are literally “all about the freight,” no kidding. We believe understanding the freight market is the key to understanding trucking, railroad, intermodal, and, ultimately, the economy.

So we are very concerned that the February Industrial Production numbers showed manufacturing output dipped 0.2%, down three months in a row. In addition, the January and December numbers were adjusted downward.

Is there a problem lurking here? Every month the experts at FTR dive deep into the freight data to understand where we are and where we are going. It is a finger-on-the pulse and ear-to-the-ground type of analysis.

What is the Current Freight Situation?

Sectors Doing Well:

·       Food – more jobs equate to more consumption and more people eating out

·       Fabricated Metals – auto industry is expected to have another good year

·       Stone, Clay and Glass – non-residential construction is on the upswing

Sectors Showing Weakness:

·       Chemicals – not sure why yet, but trend is not good

·       Metal Mining/Primary Metals – commodity prices much weaker

·       Lumber and Wood – not horrible, but housing starts still slow

·       Petroleum – due to the drop in crude prices, but not as bad as expected

·       Coal – regulation continues to batter this sector

There are fewer chemical tanker loads right now. 
What This Means for Truck Freight

We see truck loadings down slightly, a minor deceleration of growth. Q1 weakens and Q2 weakens some more. This means our forecast for 2015 freight growth is now in the 3-4% range, down from 4-5%.

Much of this weakness is in the Dry Van trailer sector, especially in commodities hauled a long distance. The liquid tanker sector is also suffering due to the slowdown in chemicals and petroleum. The Bulk/Dump sector is down slightly, and the Refrigerated Van and Flatbed sectors are holding up well.

What This Means for Rail Freight

On the rail side: Grain, Lumber and Wood, Chemicals, and Motor Vehicles are doing well. Coal, Frack Sand, Petroleum, Pulp and Paper, and Metals are weaker. Overall, the rail freight 4-week moving average is down 2.6% year-over-year.

The Wild Cards

Normally this freight situation would be cause for alarm, however there are two external factors impacting the data. The recently settled West Coast port strike restricted component parts from getting to some manufacturers causing disruptions. It also prevented some products from shipping out. In addition, it has created major problems for intermodal freight.

The second factor is the Siberian Express effect in February. Last year’s Polar Vortex caused major disruptions to manufacturing, especially in the Midwest. I do not see the similar trends from the Siberian Express this year. It did have an impact on commerce, especially retail sales, but it did not have a big impact on the industrial side.

Therefore, we know freight and economic growth are slowing, but we don’t know if it is a short-term situation caused by these abnormal factors or if there are other reasons behind it. The data and the trends are unclear, making it too soon to tell.

Service Sector Still Lags

Manufacturing (and thus freight) has been stronger than services in this recovery. It is usually the other way around and, therefore, we have been expecting the service sector to catch up. This has been confusing; however, maybe the depth and nature of the Great Recession provides an explanation. Many services are substitutable, meaning you can perform the service yourself. So maybe people are still doing their own landscaping, painting their houses, and grooming their pets, instead of paying others to do it. Real unemployment is still high and incomes have not recovered, so this would make economic sense.


If we now expect freight (and manufacturing) to grow around 3.5% this year, then, based on the last few years, the economy would be growing slower than that, somewhere in the 2.5% - 3% range. This is consistent with most current economic forecasts. My prior analysis of leading economic indicators would indicate the port strike and weather are minor factors, and the overall trend is pointing to slower growth.

This post first appeared on the FTR website.  FTR is the leader in analyzing and forecasting the commercial transportation industry.  For more information on FTR reports and services, please click here.)

Wednesday, March 18, 2015

I’ve Lost That Economic-Loving Feeling

I’m kind of losing that “economic-loving feeling.” The ISM (Purchasing Managers) Index is weaker, exports are down, construction down, factory orders down, retail sales are below expectations, unemployment claims are up, and the Q4 GDP was revised down to 2.2%. Is this a problem?
It’s difficult to tell. The West Coast ports will be constipated for at least two more months. Not getting the stuff in hurts retail sales and increases manufacturing costs; not getting the stuff out really slows exports. New England is still literally buried in snow, and this year’s Siberian Express made the Polar Vortex put on a sweater.

So let’s check out some forward looking economic indicators to try to find an answer:

ECRI (Economic Cycle Research Institute) Weekly Growth Index

This index used to be “money” before the Great Recession jumbled all the economic data, but it still is reliable at forecasting the direction of the economy. The index peaked around May and has been running in negative territory since October. Considering the index is designed to forecast conditions six months out, it says things should start weakening about now.

The Call:  Very Interesting – but not in a good way.

Leading Economic Index (The Conference Board)

Up 0.2% in January, 0.4 in December, and 0.5% in November on the surface it looks positive, however their last summary says that “growth has moderated in recent months” and there is “downside risk” for the economy.

The Call:  Nervous about this “downside risk” statement considering the current environment.

Home Builder Confidence Index – (NAHB)

Down two points to 55 (50 is neutral), attributed to bad weather across much of the nation (although the index is supposed to be forward looking). The good news: housing is holding steady with the 2015 forecast. The bad news: housing is holding steady with the 2015 forecast.

The Call:  No news is fair news. If things are slowing, it is not due to the housing market.

Moody’s Survey of Business Confidence

“Confidence is especially strong in the U.S. where businesses are feeling good about sales, hiring, and investment.”

The Call:  Business executives still expect 2015 to be another decent year.

The NFIB Small Business Optimism Index

At 98.0 in February, basically flat from 97.9 in January. This index has stalled out, after a strong run in Q4.  It peaked at 100.4 in December, the first reading over 100 since the Great Recession.
The Call:  Hard to call, but there is a good chance it indicates moderately slower growth.

Bloomberg Consumer Comfort Index

This weekly measurement of consumer confidence was up 70 basis points to 43.5. However, this index had been declining in February and is still near its low point for the year. The “National Economy Subindex” portion hit a seven-and-a-half high in January, and then started to fade.
The Call:  This index is fairly reliable and it indicates consumer sentiment, and, therefore, future retail sales are weakening.

Philly FED Manufacturing Business Outlook Survey

The diffusion index for current activity fell slightly to 5.2, from 6.3. The diffusion for general future activity did take a noticeable dip however and is the lowest point in two years.

The Call:  It does appear that manufacturing growth in 2015 will be slower than 2014.

What It Means

These indicators, as a group, point to slower economic growth for the first half of 2015. Does this mean weaker than the 2.2% of Q4, or the 2.4% of 2014? Hey, I guess it doesn’t matter much, does it? None of the indicators are flashing “red” yet, except for the ECRI, so I think growth continues in 2015. The good news, if any, is that the economy is not overheated, so maybe just ease into the next recession, whenever that occurs.

The Scoop

The Wall Street Journal’s economic panel is forecasting GDP at 2.7% in Q1 and 2.9% in Q2. Based on these forward looking indicators, I’m betting on the “under.” 


Yes, I’ve lost that economic loving feeling – “Now it's gone...gone...gone...”