Is the U.S. economy sinking into a new recession? Or has another downturn already started? Tomorrow’s November update of the Chicago Fed National Activity Index (CFNAI) may provide a quantitative answer. In the October reading, CFNAI’s three-month moving average slipped to -0.56, the closest to the red line of -0.70 since the Great Recession ended. A fall below -0.70 would be considered a sign of an “increasing likelihood that a recession has begun,” according to the Chicago Fed. No one can dismiss the risk, but The Capital Spectator’s average econometric forecast anticipates a rebound that moves CFNAI’s 3-month average away from the brink: -0.26, or up from -0.56 in October.
Jobless Claims Rise, But Remain Near 2012 Lows
Jobless claims increased by 17,000 last week to a seasonally adjusted 361,000. The pop isn’t surprising, nor is it particularly worrisome at this point. As I noted earlier today, before the report’s release, my average econometric forecast called for a gain to 361,000. That’s exactly what we got—a freak incident of specificity, no doubt. In any case, the higher level of claims looks like noise within the range that’s prevailed for much of this year. As a result, today’s number, despite what you might hear otherwise, is mostly a yawn.
Weekly Jobless Claims: 15 Dec 2012 Preview
Today’s update on weekly jobless claims (scheduled for release at 8:30am eastern) is widely expected to post an increase after last week’s drop to just over a five-year low. The Capital Spectator’s average econometric forecast sees a rise to 361,000 new filings for unemployment benefits last week (seasonally adjusted) vs. the previously reported 343,000.
Housing Starts Fall In November, But Outlook Remains Bright
Housing starts fell 3% last month, the Census Bureau reports. The retreat is the first monthly setback since July, although the drop isn’t a big surprise, as I discussed earlier today, before the numbers were released. More importantly, November’s red ink doesn’t appear particularly troubling in terms of the outlook because it doesn’t change the overall momentum profile. The annual trend in new housing construction continues to rise at a strong pace, largely because demographics and demand are again pushing homebuilding activity higher.
Housing Starts: November 2012 Preview
The November update on housing starts is scheduled for release today (8:30 am eastern) and a decline is widely expected vs. October’s 3.6% rise. The Capital Spectator’s average econometric forecast anticipates a 2.5% decrease. Another factor that implies that starts will fall in November is the relatively high level of new housing construction in October vs. the number of building permits issued in that month. The two series tend to track one another fairly closely through time and so any deviations between the pair don’t usually persist. In recent years, whenever starts exceeded permits, starts usually declined in the following month. In October, starts rose above the level of permits for the first time since April.
Barron’s Roundtable Vs. Mr. Market’s Asset Allocation
Mebane Faber has some fun thinking about an idea for an ETF that tracks the investment results published by the Barron’s Roundtable, an annual feature dispenses an array of portfolio recommendations. As Pundit Tracker notes, “following the investment picks of the annual Barron’s Roundtable has been a lucrative approach over the years. Since 2002, the average Roundtable return has been 11.5% versus -0.2% for S&P 500, with all but one of the members outperforming the index.”
Q4:2012 U.S. GDP Nowcast Update | 12.17.2012
Gross domestic product for the U.S. in the fourth-quarter is on track to rise by 1.5%, according to the average of The Capital Spectator’s five econometric “nowcasts”. That’s up slightly from the 1.2% average in our previous update on November 23. The improvement isn’t surprising, considering the recent round of upbeat economic reports, including the revivals in industrial production and retail sales numbers for November. Today’s GDP nowcast for Q4 reflects the latest fourth-quarter indicators, and the prevailing wind at the moment is blowing positive, albeit modestly so.
Book Bits | 12.15.12
● Practical Risk-Adjusted Performance Measurement
By Carl Bacon
Summary via publisher, Wiley
Risk within asset management firms has an undeserved reputation for being an overly complex, mathematical subject. This book simplifies the subject and demonstrates with practical examples that risk is perfectly straightforward and not as complicated as it might seem. Unlike most books written on portfolio risk, which generally focus on ex-ante risk from an academic perspective using complicated language and no worked examples, this book focuses on ex-post risk from a buy side, asset management, risk practitioners perspective, including a number of practical worked examples for risk measures and their interpretation.
Industrial Production Rebounds Sharply In November
Industrial production mounted a surprisingly strong comeback last month. The 1.1% surge in the Fed’s industrial production index—the biggest monthly gain in nearly two years—surprised many analysts, including yours truly. Surprising or not, it’s clear that October’s dreadful decline in this indicator (a decline that was revised further into the red in today’s update) was a temporary setback rather than a sign that the trend was slipping over the edge. Indeed, the cyclically sensitive manufacturing component in today’s report also registered a strong 1.1% increase in November.
Industrial Production: November 2012 Preview
The November update on industrial production is scheduled for release today (9:15am eastern) and most analysts are expecting a rebound from October’s 0.4% slump. The Capital Spectator’s econometric forecasts are mixed, however, although the average of these predictions leans modestly into positive territory with a slight 0.1% increase. That’s a sign for thinking that industrial production will post a gain in today’s report, but probably not as much as the consensus outlook anticipates.