Data Watch

Manufacturing production is ‘courting the devil’. The pattern shows that the trend (as measured by the 12-month accumulated growth) of manufacturing industrial production was still positive, sometimes significantly so, when a recession began, turning negative as the recession progresses. At the moment, that indicator is barely positive and has been bracing zero growth for some time....

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A very modest increase in small business optimism did nothing to alter small business owners’ view that the economy is struggling. The opening paragraphs of the press release say it all: The Index of Small Business Optimism rose two tenths of a point in May to 93.8, a negligible increase showing no real enthusiasm for making capital outlays, increasing inventories, or expanding, according to the National Federation of Independent Business (NFIB). “The bottom line is that without an empowered small business sector, the economy will grow at a mediocre pace,” said NFIB Chief Economist Bill Dunkelberg. There seems to be…...

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The Federal Reserve Board’s composite labor market indicator came out with the really awful figure expected by us since last Friday’s payrolls data. The consensus was probably a little bit stale for this not-so-well-regarded indicator, but it was expecting a far smaller decline of -0.8 versus the -4.8 actually shown. It was the worst figure for seven years. Recent history was also revised lower so that the apparent modest reduction in the decline shown in the last data point was now just part of a steadily worsening one way bet. The chart indicates that it is worsening since the Fed…...

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The release this morning of the PCE for April was “cheered”. Some decried it was “a solid start for Q2”. Let us take a closer look. The data that “mesmerized” observers is shown in the chart below. April registered the highest jump in the month on month nominal PCE growth for the past six years. In our view, however, month on month growth is very uninformative. Last month, for example, growth was almost nonexistent. A better view is of the hard trend, as reflected in the accumulated 12-month growth rate. And the trend bears a close relation to what´s happening…...

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Well, that wasn’t expected by the market. The somewhat surprising (to us) upward trend in the bi-weekly Markit Services PMI (and reflected also in the “official” monthly ISM Non-Manufacturing PMI) came to a halt today. Instead of rising from 52.8 to 53.1 it fell back to 51.2. We had suspected the improving trend to be a false steer given the consistently poor manufacturing surveys and other data. Service sector hiring intentions were also weak. The “optimism” survey was awful, as Markit reported: May data highlighted a renewed fall in business optimism across the service economy. Reflecting this, the balance of service…...

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PMI: This bi-weekly survey is a sort of “unofficial” US Manufacturing PMI that rivals the monthly “official” version from the Institute of Supply Management. It does seem to track and pre-empt its more well-known and longer established rival. It showed an unexpected fall for the first two weeks of May to 50.5. Consensus had it rising to 51.0 from 50.8 from the depressed trend of the last several months. It was interestingly in-line with the dour readings for May released last week by the regional Philly Fed and in the Empire State Manufacturing survey. It is not encouraging that even before…...

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The best surveys for current US business activity came out today as a pair, the bi-weekly unofficial Services PMI from Markit and the “official” services or ISM Non-Manufacturing PMI. Both had been showing a string of weak numbers since the turn of the year but also both had stopped getting worse and were slowly improving. Well, they both improved faster than expected in the last two weeks for Markit and for the last month for the ISM. Markit Services PMI rose to 52.8 vs 52.1 expected and prior, though still well-down on the 2014-15 trend of 55 and over. ISM…...

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Today we got the simultaneous release of two surveys of the all-important service sector. We had expected a modest recovery in both surveys given very weak readings in January and February plus some regional Fed surveys for March showing a bit of a pick-up. Both came in a bit stronger than expected but showed no great recovery from the lows. The US economy remains close to stall speed. Markit’s bi-weekly Services PMI recovered to 51.3 from an expected 51.0. By their own calculations Markit reckon that combining their Services PMI with their manufacturing PMI to create their composite PMI is…...

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Maybe not as much as touted by many. Unemployment, at 5% is on the low side and employment gains have been ‘strong’. 2015, for example, was second to 2014 in jobs growth since 1999. However, let us look at things from a longer perspective. The chart shows: 1. The employment loss in this cycle was far bigger than in previous ones 2. The dashed line represents average quarterly employment change from 1960 to 2007. 3. Note that in most previous cycles, during the recovery employment gains would rise significantly to compensate the loss. In the present and previous cycles that…...

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The PCE price indexes both core and headline will have disappointed the hawks. Core PCE did not follow Core CPI in shooting higher as it remained firmly at 1.7%. And Headline PCE remained just as dull as ever, like the discredited CPI Index, bumbling along at woeful 1%. This is better than the 0% seen for most of 2015 but still below the still poor sub-2% seen during 2013-2014. The actual clean PCE data unadjusted for estimated price movements was really poor. Nominal expenditure growth is minimal. As we had suspected, following the big downward revision in January’s Retail Sales…...

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