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A Bird's Eye View Blog

Fireside Charts: U.S. Retail Sales Drop, Global Outlook Contracts, But China Manufacturing Eases Worries

by : BCM Investment Team | POSTED: Apr03, 2019 | CATEGORY: Equity, Economics, Market Highlights, Fireside Charts

Today's blog post begins with the Citigroup Economic Surprise Index. While the index has little bearing on equity prices, it does portray more negative economic sentiment in the U.S. Meanwhile, has China turned a corner? Retail sales in the U.S. are down sharply over a three-month period. The global manufacturing PMI has been falling for quite some time – today we take a look at Canada, Germany, and Mexico. Earnings per share (EPS) expectations for South Korean companies have plummeted. Lastly, don’t forget that April is Financial Literacy Month! Read our first post of the month at the end of this blog.

 

 

1. While this index has a very low correlation to equity prices, it does sum up the good and the bad economic news (negative =more bad news than good)

 

 4.3 chart 11

Source: Citi, as of 4/2/19

   

 

2. While one month does not make a trend (or in this case break one), it was nice to see a positive economic surprise!

 

4.3 chart 1

Source: WSJ Daily Shot, as of 4/1/19

 

  

3. Has China turned a corner? 

 

 

Source: CEIC, as of 4/3/19

 

 

4. On a three month basis, even removing the more volatile components (control group), the trend is concerning....

 

 4.3 chart 3

Source: Refinitiv, as of 4/2/19

 

 

5. ~68% of the U.S. economy is based on the consumer. December hosted the Government shutdown and January was the rebound. The trend is of concern...

4.3 chart 2-1

Source: WSJ Daily Shot, as of 4/2/19

 

 

6. An update to U.S. shale oil/gas production...the breakeven prices for new wells has fallen to around $50/barrel.

 

 

Source: WSJ Daily Shot, as of 4/3/19

 

 

7. Global PMI was flat last month. A bottom? A pause? 

 

 4.3 chart 8-1

Source: IHS Markit, as of 4/2/19

 

 

8. The Canadian manufacturing slowdown continues. German manufacturing slipped deeper into the contraction (less than 50).

 

Canada:

4.3 chart 4

 

Germany:

 

4.3 chart 5

Source: IHS Markit, as of 4/2/19

  

 

9. Mexico's manufacturing economy is like Canada's. Is the U.S. economy on an island?

 

4.3 chart 7

Source: IHS Markit, as of 4/2/19

 

 

10. Europe as a whole is slipping further into a manufacturing recession. Brexit is not helping...

 

4.3 chart 6

Source: Deutsche Bank Research, as of 4/2/19

  

     

11. And the tariffs continue to punish...

 

4.3 chart 10

Source: CPB World Trade Monitor, as of 4/2/19

    

 

12. Global earnings expectations have been declining from healthy ranges to mid-low single digits. Japan, Europe and Korea are negative. This is part of the disconnect... Lower future earnings expectations should bring lower stock prices.

 

 

Source: Oxford Economics, as of 4/3/19

  

 

April showers bring... financial literacy? In honor of April being Financial Literacy Month, we are publishing macroeconomic, investing, and personal finance content suited for readers of all financial knowledge levels. Read our first piece of the month, an expanded version of one of our most popular Financial Literacy posts over the years, our Glossary of Financial Terms. This year's version contains some of the most relevant terms, buzzwords, and concepts of 2019 that you (or your clients) need to know!

 

Financial Literacy Posts 

 

 

 

Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.