Tag Archive: manufacturing

Monthly Macro Monitor: Doom & Gloom, Good Grief

When I first got in this business oh so many years ago, my mentor told me that I shouldn’t waste my time worrying about the things everyone else was worrying about. As I’ve related in these missives before, he called those things “well worried”. His point was that once everyone was aware of something it was priced into the market and not worth your time.

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No Longer Hanging In, Europe May Have (Been) Broken Down

Mario Draghi can thank Jay Powell at his retirement party. The latter being so inept as to allow federal funds, of all things, to take hold of global financial attention, everyone quickly shifted and forgot what a mess the ECB’s QE restart had been. But it’s not really one or the other, is it? Once it actually finishes, the takeaway from all of September should be the world’s two most important central banks each botching their...

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Focus Is On The Pre-recession Condition

Before the Great “Recession” ended the business cycle as we once knew it, there was a widely accepted concept known as stall speed. In the US, if GDP growth decelerated down to around 2% it suggested the system had reached a danger zone of sorts. In a such a weakened state, one good push, or shock, could send the economy plunging into recession.

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United States: The ISM Conundrum

Bond yields have tumbled this morning, bringing the 10-year US Treasury rate within sight of its record low level. The catalyst appears to have been the ISM’s Manufacturing PMI. Falling below 50, this widely followed economic indicator continues its rapid unwinding.

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Copper Confirmed

Copper prices behave more deliberately than perhaps prices in other commodity markets. Like gold, it is still set by a mix of economic (meaning physical) and financial (meaning collateral and financing). Unlike gold, there doesn’t seem to be any rush to get to wherever the commodity market is going. Over the last several years, it has been more long periods of sideways.

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Japan: Fall Like Germany, Or Give Hope To The Rest of the World?

After trading overnight in Asia, Japan’s government bond market is within a hair’s breadth of setting new record lows. The 10-year JGB is within a basis point and a fraction of one while the 5-year JGB has only 2 bps to reach. It otherwise seems at odds with the mainstream narrative at least where Japan’s economy is concerned.

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US Industrial Downturn: What If Oil and Inventory Join It?

Revised estimates from the Federal Reserve are beginning to suggest another area for concern in the US economy. There hadn’t really been all that much supply side capex activity taking place to begin with. Despite the idea of an economic boom in 2017, businesses across the whole economy just hadn’t been building like there was one nor in anticipation of one.

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Why You Should Care Germany More and More Looks Like 2009

What if Germany’s economy falls into recession? Unlike, say, Argentina, you can’t so easily dismiss German struggles as an exclusive product of German factors. One of the most orderly and efficient systems in Europe and all the world, when Germany begins to struggle it raises immediate questions about everywhere else.

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US Economic Crosscurrents Reach the 50 Mark

In the official narrative, the economy is robust and resilient. The fundamentals, particularly the labor market, are solid. It’s just that there has arisen an undercurrent or crosscurrent of some other stuff. Central bankers initially pointed the finger at trade wars and the negative “sentiment” it creates across the world but they’ve changed their view somewhat.

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Germany Struggles On

The popular image of the German industrial machine politics is one which has Germany’s massive factories efficiently churning out goods for trade with the South of Europe (Club Med). Because of the common currency, numerous disparities starting with productivity differences had left the South highly indebted to the North just as the Global Financial Crisis would strike.

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Japan’s Bellwether On Nasty #4

One reason why Japanese bond yields are approaching records like their German counterparts is the global economy indicated in Japan’s economic accounts. As in Germany, Japan is an outward facing system. It relies on the concept of global growth for marginal changes. Therefore, if the global economy is coming up short, we’d see it in Japan first and maybe best.

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China’s Blowout IP, Frugal Stimulus, and Sinking Capex

It had been 55 months, nearly five years since China’s vast and troubled industrial sector had seen growth better than 8%. Not since the first sparks of the rising dollar, Euro$ #3’s worst, had Industrial Production been better than that mark. What used to be a floor had seemingly become an unbreakable ceiling over this past half a decade. According to Chinese estimates, IP in March 2019 was 8.5% more than it was in March 2018. That was far more...

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Green Shoot or Domestic Stall?

According to revised figures, things were really looking up for US industry. For the month of April 2018, the Federal Reserve’s Diffusion Index (3-month) for Industrial Production hit 68.2. Like a lot of other sentiment indicators, this was the highest in so long it had to be something. For this particular index, it hadn’t seen better than 68 since way back in March 2010, back when the economy looked briefly like it might actually recover.

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External Demand, Global Means Global

The Reserve Bank of India (RBI) cut its benchmark money rate for the second straight meeting. Reducing its repo rate by 25 bps, down to 6%, the central bank once gripped by political turmoil has certainly shifted gears. Former Governor Urjit Patel was essentially removed (he resigned) in December after feuding with the federal government over his perceived hawkish stance.

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Slump, Downturn, Recession; All Add Up To Sideways

According to Germany’s Zentrum für Europäische Wirtschaftsforschung, or ZEW, the slump in the country’s economy has now reached its fourteenth month. The institute’s sentiment index has improved in the last two, but only slightly. As of the latest calculation released today, it stands at -3.6.

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The World Economy’s Industrial Downswing

As economic data for 2019 comes in, the numbers continue to suggest more slowing especially in the goods economy. Perhaps what happened during that October-December window was a soft patch. Even if that was the case, we should still expect second and third order effects to follow along from it.

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Monthly Macro Chart Review – March

We’re changing the format on our Macro updates, breaking the report into two parts. This is part one, a review of the data released the previous month with charts to highlight the ones we deem important. We’ll post another one next week that will be more commentary and the market based indicators we use to monitor recession risk.

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Meanwhile, Over In Asia

While Western markets breathed a sigh of relief that US GDP didn’t confirm the global slowdown, not yet, what was taking place over in Asia went in the other direction. There has been a sense, a wish perhaps, that if the global economy truly did hit a rough spot it would be limited to just the last three months of 2018. Hopefully Mario Draghi is on to something.

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US Manufacturing Questions

The US economic data begins to trickle in slowly. Today, the reopened Census Bureau reports on orders and shipments to and from US factories dating back to last November. New orders for durable goods rose just 4.5% year-over-year in that month, while shipments gained 4.7%. The 6-month average for new orders was in November pulled down to just 6.6%, the lowest since September 2017 (hurricanes).

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Fear Or Reflation Gold?

Gold is on fire, but why is it on fire? When the precious metals’ price falls, Stage 2, we have a pretty good idea what that means (collateral). But when it goes the other way, reflation or fear of deflation? Stage 1 or Stage 3? If it is Stage 1 reflation based on something like the Fed’s turnaround, then we would expect to find US$ markets trading in exactly the same way.

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