Retail sales in the US have been range bound since 2013.
Light Trucks, one of my favourite economic indicators as the sales of trucks tend to turn down prior to recessions, continue to expand. There has been weakness in auto sales though. This indicator should be continued to be monitored to see if the weakness in auto sales is foreshadowing a slow down or peak in truck sales.
Household net worth is approaching previous peaks. With recent discussion of the invalidity of the Permant Income Hypothesis (the idea that transitory changes in income only has a small effect on consumption due to consumption smoothing) the expansion of total net worth may entice consumers to open their wallets and consume more. This could further ignite the animal spirits seen recently in the consumer expectations surveys.
According to Calculated Risk visitor traffic to Las Vegas as of October is 2.9% above the record year of 2015 and 10% above the pre-Financial Crisis peak indicating that people feel confident enough to spend money on travel.
Residential private construction is still well below the housing bubble peak and will likely never return to that level, or at least not until the population expands enough to support that level of construction, however, commercial construction is approaching pre-Financial crisis levels.
Both the US non-manufacturing and manufacturing ISM indices have expanded to recent highs.
The Global Manufacturing Output data suggests an uptick in economic activity.
This is reflected in the in the data showing both Developed and Emerging Purchasing Managers Indices moving higher in 2016.
Both Chinese Purchasing Managers Indices (manufacturing and non-manufacturing) are both positive for the first time since late 2014.
However, new orders in the US remain weak.
The Cass Trucking Indices are both near their highs, but below the highs set in 2015 suggesting the economy has cooled over the past year.
In the same report about Vegas by Calculated Risk it mentions that convention traffic is up 14% versus 2015 and that 2015 was up 14% versus 2014 indicating positive expectations about sales opportunities by businesses.
However, hotel occupancy decreased 1.2% and average revenue per room declined 4.2% in 2016 suggesting the travel industry has cooled slightly.
The Port of Los Angeles processed 877,564 Twenty Foot Equivalent Units making an all time record and November volumes were up 23.6 percent versus November 2015.
They reported that imports increased 22 percent and exports jumped 25 percent in addition to a 26% percent surge in empty containers.
Total cargo volumes for 2016 to November represent an increase of 7 percent compared to the same period in 2015.
Weekly Raw Steel production for 2016 is down from 2015 by 0.6%, however 2015 was an increase on 2014.
Both of these data points suggest moderate to slightly above expectation economic activity.
Wages and Inflation
Average hourly earnings growth has reached levels not seen since 2009.
Unit labour costs are also near multi-year highs. There appears to be some wage inflation working into the production chain. Will it cause price increases, that is yet to be seen.
Chinese producer prices tend to follow global manufacturing purchasing mangers indices. After years of exporting deflation could the Chinese economy begin to export inflation?
GDP growth in America is positive but not exemplary.
Chinese GDP has leveled out around 6%, according to the government (so likely 4% in reality) however, the uptick in the PMI data suggests it could increase in the months ahead.
An inverted yield curve (ten year bond minus 2 year bond yield) is an indication of weaker growth and most often a recession. The number of countries with an inverted yield curve has approached the lows seen in 2004 and 2010 suggesting global growth should accelerate.
The US Yield curve has been steepening which is positive for the financial sector as banks make money on the spread between deposits and loans.
Yet monetary policy is still quite loose as indicated by negative real rates in the US and the large amount of bonds trading at a negative yield globally.
Leading Economic Indicators
US and global economic indicators have yet to decline and much of the world is still in positive territory.
Taxes and Profits
One area of concern is that government tax receipt growth has fallen below 0%. This is usually only seen after a recession. Taxes are a good economic indicator as nobody pays taxes on business they did not do.
Another area of concern is that corporate profits have rolled over while wages are increasing. This to me suggests that profits will be constrained. The silver lining in this report is that consumers will have more to spend.
Global economic growth is positive and appears to be accelerating slightly. The cycle is likely in the mature to later phases but at the moment a recession in the US or globally does not appear to be imminent. As each day passes, statistically the world gets closer to another recession (because if a recession is the future at some point each day is one day closer), however, the expansion phase of the business cycle continues.
There are a number of risks and negatives that I have not addressed, and even though negativity sells I feel there are enough websites that have the doom trade cornered, that could derail growth but for the time being the expansion plods along.