If you look at the broad aggregate numbers that come out from the government, it would seem like the economy is just plain stalled here. For example, just this morning we got retail sales numbers for August and they fell by 0.2%. That's very subpar. Then the Federal Reserve issued an industrial production number that was clearly disappointing, a 0.9% dip.
But do these numbers really tell the story? Some of these figures were affected by Hurricane Harvey. However, I find these aggregate figures at best nettlesome and at worst just incomprehensible, which is why I use what is known as a bottoms-up approach where I rely on companies themselves to give me a read on the economy, both here and abroad.
This week, for example, Brad Jacobs, CEO of XPO Logistics (XPO) , which is a gigantic transport company with tentacles around the world, talked about how the domestic and European economies are growing very strongly. He talked about an industrial-led recovery that is simply not being talked about.
Yesterday at a Morgan Stanley conference, the big Cleveland-based industrial Eaton (ETN) talked about the global economy as if it were as strong as the Indians themselves in their amazing 22-game win streak.
To quote Eaton's vice chairman and chief financial planning officer, Richard Fearon, "our markets are benefiting from the return of growth around the world in industrial activity." Bucking the trends we hear about all of the time, Fearon said "the growth is very strong in China, I would say, very strong in Europe," and the United States is "starting to see some signs of acceleration in some spaces."
Given that Eaton has its fingers in a whole bunch of pies, including trucking, aerospace, data centers, electric cars and oil and gas, that's some important information.
Earlier this week, Caterpillar (CAT) , the industrial earth-moving and engine giant, spent a full day telling you how robust its business has been of late and how the economic cycle has picked up across the board. CAT's business has been in decline for almost five years. That's over. They have a solid book of orders around the globe.
The other day when United Technologies (UTX) bought Rockwell Collins (COL) , the company took pains to talk about how its climate control and Otis Elevators businesses were performing above plan. People were way too fixated, I thought, on the acquisition and didn't even bother to recognize what it means for commercial and residential construction to have those markets be strong.
And then yesterday we had one of the largest shopping-center owners in the country, Brixmor (BRX) , on and CEO Jim Taylor made it very clear that despite what you read about Amazon (AMZN) destroying retail, he's got no problem finding new customers when other companies vacate the premises. If things are as weak as the retail sales numbers indicate, how in heck can Brixmor be doing that well? I think the answer is that the numbers don't catch the real activity.
I point this out because the Dow Jones industrials keep going higher yet people remain endlessly skeptical that anything good can be happening industrially both here and around the world. Yet Brixmor, Eaton, XPO Logistics, Caterpillar and United Technologies tell a pretty positive picture of what's really going on.
So don't be baffled by the national retail sales and industrial production numbers. Be skeptical of them. There's a much better story out there if you look under the hood, one that seems to be gaining strength just when people seem to be giving up on it because of aggregate data that -- falsely, I think -- show otherwise.