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By HaleStewart December 17, 2017 6:58 am
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US Economic Week in Review:The Coincident Indicators Point Towards Continued Modest Expansion

        This week, two coincident indicators were released: industrial production was up .2% M/M while retail sales expanded a surprisingly strong .8% M/M.  When these readings are combined with the other major coincident indicators (establishment job growth and real income less transfer payments) a positive picture of the US economy is revealed.

            Retail sales are on a tear:

Total retail sales (top chart, left) and retail sales ex-autos (lower left-hand chart) are both in the middle of 5-year uptrends.  Each is also at a 5-year high on a Y/Y basis (upper and lower right).  Individual retail sectors reported strong results in the latest report (all figures Q/Q Y/Y): furniture stores (+1.2%/+8.4%); building supplies (+1.2%/+10.7%); electronic stores (+2.1%/+6.4%); internet sales (+2.5%/10.4%).  The Y/Y numbers are especially strong. 

            Industrial production rose .2% M/M and 3.4% Y/Y:

Looking at the data on a longer-term chart, it appears industrial production could finally print post-recession highs in the next few months:

Two sub-categories deserve attention:

Manufacturing is growing solidly on an absolute level (upper left) and is near a 5-year Y/Y high (upper right chart).  The final products sector is just off a 5-year high on an absolute level (lower left chart) and is at a 5-year high on a Y/Y basis (lower right).   

            Employment continues to grow at a consistent pace, especially considering the expansion’s length:

 

(All the above charts contain 3, 6, and 12-month averages).  All three moving averages for total establishment job growth are over 170,000 (top chart).  Manufacturing job growth (middle chart) is increasing (although its still low on an absolute level) while service sector growth continues to print in the 130,000-140,000 level.

            Finally, we have wages.  As has been noted over on the Bonddad Blog (here and here), this expansion’s wage growth is not only disappointing but is also now trailing inflation since mid-summer.  Real income less transfer payments is doing a little better:

 

In absolute terms, it’s currently rising modest (left chart) and on a Y/Y basis, it’s recently increased its growth rate (right chart).   

            The coincidental picture of the US is strong.  Consumers are spending at a solid clip and industrial production is (finally) approached post-recession highs.  Employment is increasing at clip commensurate with an economy in the latter stages of an expansion.  Wage growth, while disappointing – is nonetheless positive.   

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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