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By HaleStewart November 26, 2017 7:24 am
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US Economic Week in Review: The Autopilot Economy Continues to Move Forward

            We continue to see healthy numbers from the economy.  While the LEIs increased smartly this month, we’ll more than likely see a slower but positive number next month.  The Census Bureau continues to report durable goods orders in the $220-$240 million/month range, indicating a steady demand.  The existing home sales market has stabilized and the jobs market has healed from the temporary problems of this falls hurricanes.

            The Conference Board released the latest Leading and Coincidental indicators on Monday.  The LEI increased a very strong 1.2%.  But there is an important caveat with this number:

The table from the report indicates that initial jobless claims were the primary driver of the increase.  This number was heavily skewed by the hurricanes, especially initial claims readings from Texas and Florida.  Below in the article is a chart of the 4-week moving average of initial claims which shows they're back to pre-hurricane levels.  In other words, don’t expect a repeat next month. 

            Earlier this month, the Philadelphia Fed released their state-level LEIs, which confirmed the Conference-Board’s readings.  Here’s a map from the Philly Fed release:

The coincidental numbers increased a far more common .3%.  The following graph shows that all are still rising:

(I’ve included real retail sales in the chart.  While this is not included in the CEI, it’s a very good indicator of the current state of the economy).

            After rising 2.2% in September, durables goods orders decreased 1.2% in October.  This shouldn’t be surprising; after the hurricanes, it was only natural to see a larger increase in this number as businesses replaced equipment.  The numbers ex-transport are a 1.1% in September and .4% in October.  More importantly, this data series continues to print in the $220-$240 billion range, where it has been for the last several years:

There are two subsets of the data that are very encouraging:

The top chart shows non-defense capital goos excluding aircraft and the bottom contains durable goods excluding transportation.  Both are in solid uptrends, which bodes well for future growth.

            Existing home sales rose by 2%:

This number has been decreasing since the mid-Spring and only recently turned higher.  It’s best to think of this market as “stabilized,” as NAR has reported numbers between 5.4 and 5.75 million (annual pace) since late in the second quarter.  Inventory (right chart) continues to be the primary constraint on this market; the months of inventory available for sale has declined for the last three years.

            Finally, initial unemployment claims decreased on the week and have returned to pre-hurricane levels. 

This indicates the jobs market has healed from its temporary imbalance.

            Next week we’ll see a slew of important data.  The BEA will release their second estimate of 3Q GDP on Wednesday; personal income – and the all-important PCE deflator – arrives on Thursday.  We’ll also get the latest Beige Book on Wednesday and new homes sales on Monday.    

In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 



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