Data Dump – Outlook Not So Good
The US economy looks increasingly stagnant as time goes on. The most recent data doesn’t bode particularly well. Here are some of the more important news items from this morning’s reports:
- Richmond Fed report was a disaster. At -17, the reading was substantially lower than expected. Econoday has some details:
“The Philly Fed a couple months ago was the first regional report that showed significant contraction in monthly conditions followed later by the New York Fed and now, dramatically, by the Richmond Fed whose manufacturing index fell to minus 17 to show very deep contraction vs only fractional contraction in June. New orders, the life blood of business, fell to minus 25 vs June’s already very weak minus 7. Backlogs, at minus 27, are extending their run of deep contraction.
Shipments show roughly the same degree of contraction as new orders while inventories are on the rise, a build that is likely unwanted given the weakness in orders. One positive, one that may not last however, is relative strength in employment though the Richmond Fed’s sample is adding fewer employees than in previous months.”
- Flash PMI for the USA came in at 51.8 – still not in recession territory, but certainly trending lower. Markit reports:
“The July Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) indicated the weakest improvement in U.S. manufacturing sector business conditions in 19 months, according to the preliminary ‘flash’ reading which is based on around 85% of usual monthly replies. At 51.8, down from 52.5 in June, the headline index was the second-lowest since the manufacturing recovery was first signalled by the PMI in late-2009 (only December 2010 saw a weaker PMI reading).”
- UPS, global economic bellwether offered a less than inspiring earnings outlook (via Business Insider):
“Increasing uncertainty in the United States, continuing weakness in Asia exports and the debt crisis in Europe are impacting projections of economic expansion,” said CEO Scott Davis.
“Export volume increased 0.8% over the same quarter last year. European growth was mostly offset by double-digit declines in exports from Asia to the U.S. and Europe. Non-U.S. Domestic volume, down 3.2%, reflected weaker economic conditions and continued yield improvement initiatives.”
Even more concerning, guidance was weak.
“As we look toward the second half of the year, customers are more concerned as greater uncertainty exists,” said CFO Kurt Kuehn. “Additionally, economic growth expectations have come down.”
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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11 Comments
All that AND Spanish and Italian sovereign yields blowing out. Quick! Get Ben on the phone!! Let’s swap some agency paper for reserves!! That’ll solve all ills.
It might not be a recession, but it’s not an expansion either. This is just getting pathetic.
This is a DEPRESSION and in a depression you can have slow growth which is not enough to create jobs for the new entrants nor to replace the jobs lost in the precedent recession. Then after a more or less long “slow growth” period it’s recession again with new job losses. Then we have a new slow growth unable to replace the lost jobs and on and on.
Cullen – Looks like the algo nailed the market move again. I know you’re trying to get out of managing money, but with the accuracy of your algo and your expertise on macro I think you should get back into it. I think people would love to be able to buy a fund that gave exposure to your strategies.
Not gonna happen. At least not in the near future.
So Cullen, are you giving up on “muddle through”? I know the trucking and rail freight numbers have been okay, and maybe housing has bottomed, but it’s hard to find much else that doesn’t spell contraction.
I do still think we’ll muddle through. But I also think there’s big time risk to the downside heading into 2013. I’m obviously running thin on my “no recession” call, but I’ve always maintained that the big risks to the economy were in 2013. Either way, I don’t see a collapse in growth happening unless we pull in on the deficit big time.
I heard you on the radio this morning explaining Europe and how the USA never has a solvency constraint. Awesome stuff!
Ha. I thought I rambled on a bit. I am always worried that this stuff is too complex for the listener. Plus, I was walking my dog on the beach and she was trying to attack a flock of seagulls the whole time. My attention wasn’t 100% on the interview at times!
hey, not sure where my first comment went, but I’ll summarize: Lacker’s an idiot, Richmond is getting what it deserves.
my second comment is this: maybe Lacker’s coming around. the hilsenrath 3:55pm “stick save” (as loony as the Zero Hedge guys are, they can coin a phrase) screams “hawks changing their tunes.”
QE3 is coming. short this market at your peril. (and be long this market at your peril!)
RE: QE3 – But are we sure that the third time will still be a charm? How much confidence will market participants continue to have in money printing vs. real growth in our economy? I dunno.
And some consumers are becoming aware that they will be hit with new taxes in 2013 like a ton of bricks.