Tuesday, January 19, 2016

Yellen’s Myth (Part 2)

While Fed Chair Janet Yellen is apparently not able to “see anything in the underlying strength of the economy that would lead me to be concerned” about recession, let’s take a look at just a few data points that may support the apparent myth that expansions "die of old age".

First, as part of the Census Department's "Manufacturing and Trade Inventories and Sales" report we find that the general ratio of inventory to sales has been climbing since late 2014 to currently stand at the highest level since mid-2009 indicating that inventories are likely mounting in the face of diminished demand.

Rail Freight Carloads, as published by the U.S. Bureau of Transportation Statistics, is currently reflecting a similar likely pullback in general demand with carloads registering annual declines for all of 2015, falling to a level last seen in early 2010.

Finally, the Dow Jones Transportation Average, a stock index representing the U.S. transportation sector, is now down over 20% from it's most recent high, the most substantial pullback seen since 2008's Great Recession.