Monday, August 10, 2015

Is the Global Economy Sinking Into a Recession? (excerpt)

One of the most accurate and reliable global economic indicators is the CRB raw industrials spot price index. It has been falling this year, and is now the lowest since November 9, 2009. However, other global economic indicators show that there is growth, and no reason to conclude that a recession is imminent or looming on the horizon. The latest upbeat indicator is June’s 2.0% increase in Germany’s new factory orders, led by foreign orders, to the best reading since April 2008.

The JP Morgan Global Composite PMI edged up from 53.1 during June to 53.4 during July. Its M-PMI component remained unchanged at 51.0, while the NM-PMI led the rise in the overall index. On the other hand, The HSBC Emerging Markets Composite PMI remained weak during July at 50.2, though that was an increase from 49.6 the month before.

China’s July trade figures remained on the soft side. On a seasonally adjusted basis, imports fell 2.1% m/m and 8.1% y/y. Some of that weakness reflected the drop in oil prices. However, imports excluding petroleum still fell 3.4% y/y during June, suggesting weak domestic demand. Exports declined 4.9% m/m last month and 8.3% y/y, suggesting weak global demand. Exports have been essentially flat now since early 2013.

In the US, the labor market continues to improve as discussed below. The Citigroup Economic Surprise Index has rebounded from the year’s low of -73.3% on March 23 to -7.6% at the end of last week.

Today's Morning Briefing: Summer Swoon? (1) Sinatra was right about the Windy City. (2) Lots of turbulence in the financial markets last week. (3) Technical picture deteriorating. (4) Omens and Death Crosses. (5) Railroads hauling less coal, but with cheaper fuel. (6) Is the bubble bursting in the commodity markets this time? (7) Mixed global picture. (8) German orders are up, led by exports, while Chinese exports remain flat. (9) Known unknown: Will small Fed rate hike have big adverse impact? (10) Yellen will soften the blow. (11) Summer swoon could be buying opportunity. (12) Latest employment reports have same rhythm as previous ones. (More for subscribers.)

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