Wednesday, December 4, 2013

US Economy Back in the Fast Lane? (excerpt)

Better-than-expected economic indicators on Monday (November’s M-PMI) and on Tuesday (October’s car sales) depressed the S&P 500, which fell 0.6% over the past two days. Investors may be taking some profits on expectations that the Fed might start tapering QE sooner rather than later.

Is this the beginning of a significant correction? I doubt it since corrections and bear markets are triggered by mounting concerns about a recession. The latest data are pointing more to a boom than a bust.

I’m not sure if the folks at the Economic Cycle Research Institute (ECRI) have changed their mind yet about the economy being in a recession. Their Weekly Leading Indicator sure doesn’t show it. Neither does the Conference Board’s Leading Economic Indicator, which rose to a cyclical high during October.

The Citigroup Economic Surprise Index remains subdued with a reading of 5.1 yesterday. However, November’s M-PMI was surprisingly strong, causing some economic truthers to question its accuracy. I expressed some of my doubts yesterday as well.

But then auto sales came out for November, showing that they spiked up to a new cyclical high of 16.4 million units. However, this may be partly a rebound from October’s sales, which were depressed by the partial shutdown of the federal government. The two-month average was 15.8 million units, a slight uptick from the third quarter’s 15.7 million units.

Another upbeat indicator was yesterday’s construction report showing that total construction put in place also rose to a new cyclical high, though it remains 25% below the record high during March 2006.

Today's Morning Briefing: A Tablet on Every Table. (1) Something is different this time. (2) Dow Chemical shedding low-margin businesses. (3) Trauma of 2008 remains traumatic. (4) Improving on the margin. (5) IT leading the margin parade. (6) There’s an app for that, even when dining out. (7) Industries with rising and falling margins. (8) Corrections usually caused by recession fears. (9) No correction if QE tapered due to strong economy. (10) Car sales and construction spending at cyclical highs. (11) Focus on overweight-rated auto-related S&P 500 industries. (More for subscribers.)

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