Economy

Checklist

 Full Steam Ahead?

The Economy’s Blood Pressure Is Falling

With freight traffic dropping, the economy could soon get dizzy… and we’ll all feel it then.

DYI:  No doubt about it freight traffic has now gone negative on a year over year basis for the last four months.  Not enough to make a recessionary call, however it is note worthy enough to keep one’s eyes on for any further declines.

DYI’s five recessionary indicators all five must being negative for telling an economic contraction.

1.) Yield inversion…2 year T-notes interest rate higher than 10 year T-bonds.  No inversion.  2 year notes are lower at 2.28% as compared to 10 year bonds at 2.45%.

2.) Widening credit spreads…5 year T-notes [2.25%] and Vanguard’s High Yield Corporate bond fund yield [5.39%].  There is some widening we’ll put this down as a negative for the economy.  Admittedly this indicator just barely makes a negative.

3.) Declining stock prices….S&P 500 fifty day moving average below the two hundred day moving average.  Not even close so this remains positive.

4.) Declining Home Builder’s Index…Fifty day moving average below the two hundred day average?  So far the answer is no.  Remains a positive.  However the difference between the two averages is only 1.75%+ of a decline by the 50 day to move below placing this indicator as negative.

5.) Purchase Managers Index:  PMI below 50.  So far this index has been declining but currently April’s number remains out of recession territory at 52.8!

   All in all the direction is negative for these indicators but clearly not enough for a recessionary call out.  This could simply be a pause in the economy or the start of an economic contraction.  We’ll have to wait and see.

        DYI