Tag: manufacturing

ISM Manufacturing Index at 57.7

ISM Manufacturing Index at 57.7

The ISM manufacturing index showed the US manufacturing sector expanding at a faster rate, with the index hitting 57.7% in February. Importantly, the three major subindices – new orders, production and employment – all showed robust expansion.

We are not in recession right now

We are not in recession right now

While the US economy has decelerated enough since mid-2015 to put me on recession watch, it has not reached the point of recession. Moreover, the data do not indicate a recession is in the offing in the near-term. Rather, a combination of policy error and exogenous shock make a recession […]

Why I am now officially on recession watch

Why I am now officially on recession watch

The recent data coming out of the US has been almost unrelentingly negative outside of the recent jobs reports. The Atlanta Fed GDP now report was already down to 0.7% for Q4 when poor output and retail sales data came out. I expect the GDPNow forecast to fall even lower. And given the signal that the change in non-farm payrolls is sending and the difficult comps for weekly jobless claims, I believe we are now at stall speed in the US economy, putting me on recession watch. I have a number of data points to review here. So let’s get to it straight away.

The Fed’s reaction function and why I am not talking about US recession yet

The Fed’s reaction function and why I am not talking about US recession yet

Ever since Willem Buiter’s call for a global recession within the next two years, people have been parsing the data for some indication that the US has been fatally compromised by contagion from emerging markets. Nothing in Buiter’s piece talked of outright recession in the US. Rather, he talked of global growth slowing to a 2% annual rate. Therefore, the US’s not entering recession would be fully consistent with his global recession call. At this point, it isn’t clear where the US will be two years from now. The most we can say is there are signs of slowing inconsistent with a rate hike. I will explain in chart form below.

EM turmoil and Eurozone laggards

EM turmoil and Eurozone laggards

The meltdown in Brazil is not exactly unexpected since one of my ten surprises for 2014 was that Brazil goes into recession. But I find the pace of the currency reaction alarming and we should be prepared for a crisis as a result. In the developed economy, despite sluggish growth, I am generally positive on the near-term. France and Italy are the laggards to be concerned with.

Fed rate hikes and global growth

Fed rate hikes and global growth

Continuing where I left off last week, I am going to emphasize here that the Federal Reserve is likely to raise US interest rates unless the US economy slows materially. Meanwhile, the economic and market fundamentals are moving in the opposite direction. I believe this indicates reactive Fed behaviour rather than anticipatory action on rates. Meanwhile, global growth signs are mixed. I will provide some anecdotes below.

The EU weighs level three sanctions on Russia just as the European economy improves

The EU weighs level three sanctions on Russia just as the European economy improves

This is a long-form post on Ukraine. The big news, however, is from the European Union where the PMIs and a slew of other economic data came out today. The data showed the European economy improving broadly from its weakened recovery status. This will give the ECB room to take a wait and see approach. At the same time, the EU foreign ministers met yesterday and, according to reports are ready to impose heavier sanctions on Russia in the wake of the downing of Malaysia Airlines Flight 17 over Ukraine. There’s a lot data to digest here so let me start off with the EU – Ukraine – Russia narrative.