Thursday, April 5, 2018

April reports of short leading indicators start out good

 - by New Deal democrat

April reports started out this week with three positive readings of short leading indicators.

First, the ISM manufacturing index, and in particular its new orders subindex, pulled back slightly but remained at very strong levels:

Second, motor vehicle sales came in at a solid --- units annualized:

This series tends to broadly plateau during expansions. If it were to drop below 16.5 million units annualized, especially for longer than one month, that would be cause for concern.

With GM dropping out, the future of this data is uncertain. Vehicle sales ex-GM would still be a worthwhile metric, but unless that is calculated, it will only be useful on a m/m basis until at least there is one year's worth of data -- and that assumes other manufacturers don't follow GM's lead.

Finally, factory orders also increased. Below I am showing the core reading ex-aircraft and defense:

The last three months have seen the highest readings in nearly 4 years. Note that this data series is noisy, and wasn't leading at all in 2008, so it is of very low utility.

In terms of the economy over the next 3 to 6 months, so far, so good in April. Tomorrow we will get two more short leading indicators, manufacturing workweek and short term unemployment, as part of the jobs report.