Inertia is one of the fundamental principles of classical physics. It is often referred to as the tendency of an object to resist changes to its state rest or motion. Newton suggested that an object will continue moving in its current velocity until some force causes its speed or direction to change.This is much like an economy. At some point an economy hits its equilibrium bottom — a point where aggregate demand simply can’t fall any further because it is essentially at its basic level of sustenance.I think we will start to see this “bottom” or low in the Bermuda economy once this level is reached because no other developments seem to be arresting the fall at this stage.Two of the best indicators to consider for this are Bermuda’s cargo trends and retail sales. Both are timely data sets that can be used to gauge the trajectory and momentum of the economy.Eastbound cargo trends help measure the volume of goods coming on to the island. A stabilisation of these figures gives an indication of basic demand.Unfortunately, Bermuda cargo trends give little evidence of a recovery in the local economy.Total eastbound year-over-year volume declined 2-3% for the first half of the year after rising slightly in the first quarter.This is partially explained by the decline in Heritage Wharf cargo and the continued weakness in the construction industry.I expect to see further weakness in this sector as the Waterloo House and hospital projects near completion and no new major construction projects are breaking ground.I am cautiously awaiting a bottom in the retail sales numbers.I would feel more confident if retail sales volumes showed three to four months of consecutive improvements and stability. This would make me more confident in calling a bottom in this space.So how close are we now?Employment trends tend to weigh on overall consumption and retail sales.One basic way to gauge an appropriate level of retail sales is to see what level of sales was present when Bermuda last had this level of employment.Bermuda’s workforce consisted of 35,443 filled positions as of 2012.According to the Bermuda Job Market and Employment Briefs, this level of jobs filled is the lowest on record since 1998 when there were a reported 35,323 filled jobs in the economy.If we look at the trailing 12 month retail sales index at that time in 1998 it was registering 68.8 as of December.The current trailing 12 month retail sales index is 95.3.If we inflation adjust the current figure over the period in consideration, the real trailing 12 month retail sales index is actually at 63.0.Given that this level is already 8.4% lower than the comparative year in which employment was at this level, we are probably closer to the end of declines in the retail industry. Assuming job losses and emigration stabilise, I would not be shocked to finally see some stability in the retail sector at some point later this year or early 2014.Arresting Bermuda’s negative economic momentum and turning the trend will require an outside force.Although we may hit a “statistical bottom” at some point, growth will not resume unless there is growth in the job market and ultimately population growth. Otherwise inertia reigns supreme.* Nathan Kowalski can be contacted at nkowalski@anchor.bm or 296-3515.Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.The opinions expressed may change as subsequent conditions vary.The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Anchor Investment Management Ltd to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results.There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. Readers should consult their financial advisors prior to any investment decision.