- by New Deal democrat
I concluded my post yesterday with the conclusion that “while housing and trucking are plainly recessionary, the broader manufacturing orders outlook and consumer purchases of vehicles are not.” Today I want to expand on that by taking a broader look at the main coincident measures of expansion vs. recession, and focus on some up-to-date measures of consumer spending.
Let’s start with two coincident measures that either have peaked or look like they are peaking in the present: real personal income excluding government transfers (blue) and jobs (red), both normed to 100 as of April:
Real income peaked in April, and nonfarm payrolls as of the last official report jobs have only increased by less than 0.1% since then. If one believes ADP and several other private measures for September, there were either slight increases or an outright decline for that month, meaning the current measure is somewhere between unchanged and up 0.1% in the 5 months since April.
Further, looking at my favorite measure of real aggregate payrolls, nonsupervisory payrolls only increased 0.1% through July and remain lower than March, while total private payrolls actually declined -0.2% since April.:
In short, both real income and jobs look like they are on the cusp of or have actually started to decline.
But the story is different when we look at the other coincident measures of real sales (blue), production (red), and real spending (gold):
All three of these continued to increase after April, and two are at new highs. While industrial production is below June’s level, its manufacturing component (not shown) made a new post-pandemic high in the most recent report, for August.
Since as I have pointed out previously, real spending on services has historically continued to rise, albeit at a more subdued rate, right through all but the worst recessions, for forecasting purposes I rely on real personal spending on goods (gold) and real retail sales (blue):
Real retail sales made a new 2.5 year high in August, while real spending on goods made a new all-time high. Which supports the point that manufacturing production and sales/purchases have been continuing to increase.
And we do have information suggesting that at very least, there was no decline in September.
First of all, the Chicago Fed publishes a twice-monthly “Advance Retail Trade Summary,” which uses weekly private data to forecast monthly nominal and real retail sales ex-motor vehicles. Here is its graph of nominal sales through September:
The Chicago Fed estimates that retail sales rose 0.3% nominally in September, and were unchanged after accounting for inflation.
Officially the US government has only reported vehicle sales through August, but the private source Omida (via Bill McBride) reported a 2% increase in the volume of sales in September vs. August:
Motor vehicle prices have been almost exactly unchanged for several years, so it is likely that this is a real $ increase in sales as well.
Finally, we also have the weekly Redbook same store sales update in YoY terms:
This continuus the strong nominal increases in excess of 5% and even over 6% that we have seen for the past several months.
In short, while several important coincident measures of the economy may have peaked, in an economy that is 70% consumer spending, until I see evidence that it has stalled as well it is hard to conclude that a recession is imminent.
