... the indicator and the ECRI’s Managing Director Lakshman Achuthan have been very confident about the sustainability of the economic recovery and have predicted a much stronger recovery than most suspect. After months of very bullish talk out of the ECRI they suddenly appeared to be hedging their bets a bit ... .
There are other red flags. This chart shows rail traffic has been declining. The take at Calculated Risk is much of the drop is in coal not goods. The Pragmatic Capitalist notes as well that if the short Thanksgiving week had been excluded (or lengthened), this November would actually have been up.
Also of concern is the more sober retail numbers for November Karl Denninger reports how ShopperTrak now says foot traffic was down 6% and sales down 0.1%.
My take remains that retail will be late this season and driven by discounts. Online sales are up (see my post on Amazon). Fedex shows increased traffic, including of small packages. Hence the momentary rollover of indicators and dismal early retail stats can be misleading.
I would urge caution to wait and see how this develops into early January. The better place to watch is what is going on with the USD, which seems to have really bottomed. It crossed its 50DMA, a very watched indicator.
There is trouble outside the US that could drive more risk aversion back to the USD. Greece is poised to be the next Dubai. We already have seen Latvia and Lithuania get into trouble, but now warning signs are hitting Spain. Mish has a longer take on this, pointing to sovereign credit troubles spreading.
Then of course something is up in Japan. They had a huge miss in GDP growth, from an initial estimate of 4.8% to a paltry 1.3%. The miss was due to an inventory bounce that never happened. Now expectations have shifted to zero GDP growth in Q4. This means Japan may be the first major economy to follow the W shaped recovery: up and then back down. Japan's response will be to print money, which will drive the Yen down and the USD up. Are they committing hara kiri with helicopters?