Falling retail sales and freight activity: Cause for concern?
By Colin Twiggs
August 19th, 2015 5:00 p.m. AEST (3:00 a.m. EDT)
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The rally in bellwether transport stock Fedex was short-lived and it is once again testing primary support at $164. Declining 13-week Twiggs Momentum, below zero, warns of a primary down-trend. Breach of support would confirm, suggesting a broad slow-down in US economic activity.
The Freight Transportation Services Index reinforces this, declining since late 2014.
But the LoDI Index contradicts, continuing its climb.
The LoDI Index uses linear regression analysis to combine cargo volume data from rail, barge, air, and truck transit, along with various economic factors. The resulting indicator is designed to predict upcoming changes in the level of logistics and distribution activity in the US and is represented by a value between 1 and 100. An index at or above 50 represents a healthy level of activity in the industry.
Growth in retail trade (excluding Motor Vehicles, Gasoline and Spares) also declined for the last two quarters but remains above core CPI.
On a positive note, however, light motor vehicle sales are climbing.
New building permits for private housing retreated in July but the trend remains upwards and new housing starts are increasing.
Overall construction spending is also rising.
Solid growth in spending on durables suggests further employment increases. This makes me reasonably confident that retail sales and freight/transport activity will recover. All the same, it would pay to keep a weather eye on Fedex and the transport indices.
Financial markets are supposed to swing like a pendulum: They may fluctuate wildly in response to exogenous shocks, but eventually they are supposed to come to rest at an equilibrium point and that point is supposed to be the same irrespective of the interim fluctuations. Instead, as I told Congress, financial markets behaved more like a wrecking ball, swinging from country to country and knocking over the weaker ones....It is difficult to escape the conclusion that the international financial system itself constituted the main ingredient in the meltdown process.
~ George Soros on the 1997 Asian Financial Crisis
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