The Chicago Federal Reserve reported that its National Activity Index (CFNAI) during March fell to -0.42 from -0.18, revised from -0.11. It was the weakest reading since January of last year. The three-month moving average remained negative. The reading of -0.27 was the lowest indication since October 2012. During the last ten years, there has been a 76% correlation between the Chicago Fed Index and the q/q change in real GDP.
Three of the four component series were negative last month. The Production & Income series fell to -0.27, roughly equaling its lowest level since January of last year. The Employment, Unemployment and Hours figure turned negative for the first time since April 2013. The Personal Consumption & Housing series remained negative at -0.13, though that was improved following last February’s collapse to -0.22. At 0.01, the Sales, Orders and Inventories series remained weak. The three-month moving average of the CFNAI deteriorated sharply to -0.27, the weakest indication since October 2012. The Fed reported that 38 of the 85 component series made positive contributions to the total while 47 made negative contributions.
In a January Bloomberg survey, projections for first-quarter aggregate demand averaged 2.8 percent; today, those expectations have been cut in half to 1.4 percent. (BloombergBriefs)
The Chicago Fed:
When the CFNAI-MA3 value moves below -0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun. Conversely, when the CFNAI-MA3 value moves above -0.70 following a period of economic contraction, there is an increasing likelihood that a recession has ended.
But Doug Short makes the correct reading:
The next chart highlights the -0.70 level and the value of the CFNAI-MA3 at the start of the seven recession that during the timeframe of this indicator. The 1973-75 event was an outlier because of the rapid rise of inflation following the 1973 Oil Embargo. As for the other six, we see that all but one started when the CFNAI-MA3 was above the -0.70 level.
The European Union’s statistics agency said Monday that construction fell 1.8% from January and 3.7% from February 2014. That drop more than reversed a January rise, and followed a decline of 0.3% in the fourth quarter of last year. (…)
Germany is expected to lead the eurozone’s pickup this year, but it was in the currency area’s largest member that construction fell most sharply, down 3.1% on the month and 8.1% on the year.
The downturn was “most acute” at end-2014 and the start of this year and the situation is now “stabilizing,” Medvedev told lawmakers at the lower house of parliament in Moscow on Tuesday. (…)
Members of the Organization of the Petroleum Exporting Countries (OPEC) should prepare for extra Iranian crude production when Western sanctions on Tehran are lifted, Iran’s oil minister was quoted on Tuesday by state news agency IRNA as saying.
“We expect the members of OPEC to pave the ground for (an) increase of Iran’s oil production that will reach global markets when sanctions are lifted,” Bijan Namdar Zanganeh said during a meeting with his Venezuelan counterpart Asdrubal Chavez in Tehran, the agency reported.
Iran, once OPEC’s second-largest producer after Saudi Arabia, hopes to boost crude exports by as much as 1 million barrels per day (bpd) if Tehran and six major powers finalize a nuclear agreement by a June 30 deadline. (…)
Iran says an increase of its oil production will not cause a price crash. However, so far there is no sign of any willingness of other OPEC members to cut supply. OPEC’s next meeting is on June 5.
- 70 companies (20.7% of the S&P 500’s market cap) have reported. Earnings are beating by 5.9% (+5.5% last week) while revenues have missed by -0.2% (-0.6%).
- Expectations are for a decline in revenue, earnings, and EPS of -3.1% (-2.9%), -3.3% (-3.5%), and -1.8% (-2.0%).
- Excluding Energy, growth would be 2.6% (2.7%), 4.6% (4.4%), and 6.3% (6.2%), respectively. This excludes the likelihood of beats, which have come in above 4% historically. (RBC Capital)