Data Watch

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… Read More

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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… Read More

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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… Read More

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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… Read More

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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… Read More

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1. US February Retail Sales were poor. While consensus was for -0.2% MoM and the actual at -0.1%, January was revised from +0.2% to -0.4%, making retail sales over the two months 0.5% lower than expected. YoY growth is now only running at a little over 3%. Importantly, this is a clean nominal data series, not one massaged into “real” by splitting out the impact of unmeasurable inflation. Retail Sales are mostly for sales through stores and on the internet, they are not for the services sector except food services. CPI for goods, about 25% of the basket, has been… Read More

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Two surveys of February activity in the US economy were interesting and both somewhat overlooked. The Fed’s Labour market Conditions index and the NFIB Small Business Optimism. Both showed slowing. All is not well. The Fed index showed a large drop. The NFIB Small Business Optimism index showed a drop on an already weak January. [see chart from page 4]

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The headline numbers for February: 242 thousand jobs and 4.9% unemployment rate. Let´s give these numbers some “structure”. The unemployment rate is the result of two forces that reflect economic decisions by individuals and firms. The first is the employment population ratio (EPOP). The second the labor force participation ratio (LFPR). The unemployment rate is equal to 1-(EPOP/LFPR). The charts show the behavior of unemployment together with its two determinants over the three most recent cycles. The first two (1990, 2001) happened during the “Great Moderation”, while the third (2007) takes place during the “Depressed Great Moderation”. The green bars… Read More

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In essence, the FOMC members are pretty much at a loss. The most relevant information was what was lacking from the Statement issued at the end of the January meeting, i.e. the “balance of risk”. From the Minutes we learn that participants were split on the issue. They´ll continue to monitor inflation developments closely to confirm that inflation will evolve along the path the Fed “anticipates”. Unfortunately, they´ve been saying that for several years now. What they´ve done is put themselves in the position of “spectators” who “wish” inflation will climb to trend, but that´s it. Meanwhile they keep blaming… Read More

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Our forecast for year-on-year growth in industrial production in January was -1.6%. The release came in at -0.6%. Month-on-month the market´s expectation was for an increase of 0.4%. The outcome was more than twice as large, 0.9%. Since the last quarter of 2014, the level of industrial production has been stagnant to falling. Year on year growth rates have been on a clear downtrend since that time. This is consistent with our view that nominal spending growth, or aggregate demand growth, has been trending down since mid-2014, when the Fed´s tightening talk increased in tone. For the next several months… Read More

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