Bi-Weekly Economic Review: Same Old, Same Old

Economic Reports Scorecard

scorecard 7-26-16

The economic data the last two weeks was deja vu all over again. The US economy has been growing at roughly 2% the last three years and I see no reason – yet – to expect that is going to change any time soon in either direction. Certainly there hasn’t been anything in the data to support that notion even if the data has generally been better than expected. Neither have our market indicators shown any dramatic moves that would indicate a major change in direction or rate of change.

There were the usual surprisingly strong reports. The retail sales report stands out in that regard, coming in not only better than expected but I think just better. Year over year rate of change is improving if still below what I’d call robust and ex-autos is doing even better. Non-store retailers – internet – are particular standouts and I think that is an indication of something bigger happening. My wife is not an economist but she knows how to shop and she recently told me that the “retail era is over”. We were in the car at the time and she pointed out the plethora of vacant retail space for lease. What I have observed is the rising incidence of packages on my doorstep. I also have a 26 year old daughter and can tell you that her generation has an entirely different view of consumption than ours, placing a lot more emphasis on doing rather than buying. There may be a lot more going on here than meets the retail sales report.

While the ex-autos portion of retail sales is doing fine, it is the auto part that shows the up and down nature of this economic expansion. Auto sales, as I mentioned in the last update, appear to have peaked for this cycle and that is probably not good news. Autos and housing have led us the last couple of years so if one of those is faltering – more on housing later – that could be a problem. Industrial production, as reported last week, is still down year over year and that is with autos up 7.8% year over year. Business equipment rebounded a little but is still down year over year. Again, this is with autos doing well; if autos moderate and nothing else comes along to pick up the slack, the manufacturing recession probably has more to go. At least inventory/sales rations appear to be stabilizing, albeit at high levels. 

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