Post Tagged with: "manufacturing"
After careful consideration, I remain bearish
The S&P has gone from 2 standard deviations below the 20-day moving average on the 16th June to 2 standard deviations above it now, something it did prior to the 87 crash when it rallied 6.4% in the week prior to the crash. It has been doing this more and more frequently recently although not of the scale of swing we have just seen. Our economists have already said that a single payroll figure is not sufficient to cause QE3 to which I agree. Commodity prices are telling us that further Asian stimulus is not going to happen unless offset by demand destruction elsewhere in the world. The risks are clearly mounting up
Despite growth slowdown, ISM manufacturing index ticks up
The uptick in US data is a nice relief given the fact that Europe’s manufacturing sector slowed to an 18-moth low. Overall, the US manufacturing sector is growing, but at a slower pace than last year. The data do not point to a pronounced change in that trend
Contrarian data point to downside risk
The mitigating factors are the recent manufacturing data and the pickup in small business credit. I especially like to see small business with access to and take up of credit because that could mean renewed hiring. The jobless claims numbers are not moving yet though. Overall, the data are still soft and the surprise index is still saying that earnings estimates will be cut. In my view that means the risk is still to the downside
Tankan and Beyond
Japan is set to release a slew of economic data on July 1. Of these the jobless rate is probably the least important. It is lagging indicator, though softness in the job-to-applicant ratio would warn of no quick improvement. On the other hand, the recovery in retail sales in May suggest overall household spending is beginning to recovery from the sharp contraction
Red Lights Flashing For Eurozone Growth
The June Flash PMI reports, which were out on Thursday, do not make for agreeable reading, in the sense that while the French and German economies both continued to expand during the month, their rate of expansion, and in particular in the leading manufacturing sector, seems to have dropped sharply, and for the second month running. In contrast, the economies on the Eurozone periphery moved closer to outright contraction. All in all the survey results only add to concerns about the global recovery which came into focus after the May PMI results
Philly Fed survey shows collapse in activity
This is in line with the weak data we have seen out of the US in recent weeks. I expect Q2 growth estimates to continue to decline as the data come in
How to become virtuous and save more
In this column, Michael Pettis uses Germany and Spain as examples of the interplay between savings rates, trade balances and economic policy. Looking at this interplay, it turns out that domestic policies by the German government can explain both high German savings and low Spanish savings
Further Chinese Yield Curve Flattening to 17bps
The last time the curve was this flat was during the panic in 2008. So I am still concerned that the potential for a more abrupt slowing exists. So far growth remains robust
On the fragile recovery and the likelihood of QE3
On balance it would then seem that the consensus remains weighed towards no QE3 either because it is not needed or because it does not work in the first place. I think it is very simple in the end though. If sideways movement gives way to a new downside in the market below key support levels it will be very easy for the Fed to argue for a new round of QE which I think they will deliver in due time.
ISM manufacturing index confirms growth slowdown
The soft patch in and of itself is not a problem. There is always some sort of mid-cycle slowdown. The real problem for economic growth bulls (and risk assets) is that this particular soft patch is increasingly likely to be met with austerity and contractionary fiscal policy
Philly Fed survey, existing home sales, leading indicators disappoint
Typical street review of today’s numbers from Goldman. As suspected, look for continued downward revisions to initial 4% Q2 estimates. And note the graph below showing employment as a % of the population. The economy continues to be demand constrained at very low levels. (That is, for the size government we have, we are grossly over taxed.) There could be as many as 30 million additional people gainfully employed in a good economy.
China losing competitiveness
As labour costs in China rise, economists are beginning to think about replacing labour with capital, something we have already seen as a major factor in suppressing wage gains in developed economies. This is also in line with what economists say developing nations need to do to counteract the problem. More importantly, developing economies that reach this juncture must move up the industrial ladder to production of higher value-added goods or they will see their export competitiveness severely eroded