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We've been tied up with our trip to the north, and have just now got back to Tucumán. I know this is by now old news, but I wanted to briefly recap this week's new data releases.



The ISM Manufacturing Index was stronger than expected, and there is no denying that this was good news, coming as it did in the midst of ongoing fears that the developing recession in the Eurozone will spill over into the U.S. To be fair, I should note that the correlation between the level of the index and the growth of GDP hasn't been nearly as good in the current business cycle as it has been in the past (see top chart). Evidently, the manufacturing sector has been a good deal stronger than the rest of the economy, so the current ISM figure doesn't necessarily argue for 4% real GDP growth in the current quarter—2-3% is probably a better guess. Nevertheless, it seems clear that with the manufacturing index doing so well, and with the employment subindex much higher than the average of recent decades, there is not even a hint of emerging weakness. Worrying about the entire economy rolling over into another recession at a time when the manufacturing sector is improving on the margin is one more sign of the pessimism that is still ruling the market.


Auto sales have softened in recent months, but sales are still up a healthy 9.6% in the year ended April. The rebound in auto sales from the depths of the recession has been very impressive. When one sector of the economy rebounds so impressively, it is bound to drag other sectors along with it in a trickle-up effect.


The ADP payroll number was weaker than expected, but is this fresh evidence of an emerging downturn? I'm not sure at all. From the looks of this chart, the blue line appears to be doing about the same as the red line, only with a difference of one month. If Friday's BLS number is weaker than it was a month ago, then it might make sense to worry that the economy was indeed softening.

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