The Economic Scorecard to the right is published each week in our Bespoke Report newsletter and shows how all the week’s economic indicators came in relative to expectations. This week was a busy one for data, and a plurality of reports came in better than expected. Of the 20 indicators released, nine came in better than expected, seven were weaker, and four were either inline or had no estimates. What was even more encouraging about this week’s data is that all but one of the inflation related indicators came in weaker than expected. In an environment where interest rates are rising on concerns of possible inflation pressures, the fact that these indicators are weaker than expected is music to a bulls ears. President-elect Trump campaigned on the premise that economic growth was either non-existent or sluggish at best, but just days after getting elected, Retail Sales came in at a 4.3% y/y growth rate, Housing Starts hit their highest levels of the recovery, and jobless claims hit a 43-year low!
The last economic indicator of the week was Leading Indicators, which was released earlier this morning and was inline with forecasts. From time to time, we have published the chart below which shows the ratio of leading to coincident indicators over time. Last year around this time, there was concern that the US economy was starting to roll over as weakness in the oil patch pulled down the manufacturing sector. We cited this chart as evidence that while there had been a slowdown, the economy wasn’t rolling over. As shown in the chart, historically the ratio between leading and coincident indicators begins to roll over well before the onset of a recession. While the ratio has stopped rising in the current period, rather than rolling over, it is exhibiting a pattern similar to the middle of prior extended expansions.