Submitted by Erico Matias Tavares of Sinclair & Co.
With the US stock market breaking new highs almost every week now, it is fair to say that animal spirits are on the loose. Several economic indicators suggest that this is warranted.
The table above shows the latest readings for the Institute for Supply Management’s New Manufacturing Orders Index, a very useful leading indicator. At 69.4 last December, it is the highest reading going back all the way to January 2004, capping off growth in new orders for 16 consecutive months. Momentum is certainly on the way up here.
The surge in small business optimism continued, as measured by the National Federation of Independent Business, with average figures setting a new all-time record in 2017.
The table above shows the percentage of small businesses reporting higher sales over a comparable period on a net basis from that same report. After years of decline and stagnation, 2017 saw a large number of positive readings. December printed the highest number in almost a decade.
This matters a great deal because it is this sector that is responsible for a significant amount of the wealth in the US. It should be noted that this surge started in earnest after the election of President Donald Trump. Whether those expectations will be met is another question, but clearly small businesses have responded to that.
The weekly rail traffic report published by the Association of American Railroads (“AAR”) provides a great snapshot of US economic activity almost in real (weekly) time. So have the railways also responded positively to the new administration?
The grey cloud in our weekly rail shipment graphs (in units) depicted henceforth shows the maximum and minimum volume range recorded for the same week over the five years prior (2012-2016). The green line shows the readings for 2017.
Rail intermodal traffic registers the long-haul movement of shipping containers and truck trailers by rail whenever combined with (a much shorter) truck movement at one or both ends. It covers a broad range of goods that Americans consume regularly, from laptops to frozen chickens, and is thus a great indicator of how consumers are doing. Given the critical importance of consumption for the US economy as a whole, for us this is the most revealing category of all.
The weekly evolution shows that after some hesitation last spring …read more