Saturday, May 7, 2016

Economic Review

This week we received a few economic reports. The ISM manufacturing and services data, and April NFP. The ISM manufacturing data turned in back to back readings above 50. That's important since a reading above 50 indicates expansion. As you can see manufacturing really started to struggle in 2015 as the strong dollar finally took it's toll. The stronger dollar makes American goods more expensive, and likely sent orders to overseas competitors for non-specialized products they can get anywhere. As the dollar has eased up this year it appears some of that business is coming back.

The ISM services data is also very important to keep an eye on as it represents a much larger component of the American economy. There is a lot of fear of a recession, and I can't blame people. However as long as services keep growing that should help the economy keep its head above water. I'd be very wary it the number starts coming in closer to 50. Any slowdown in this sector can cause the economy to fall back into a recession quickly considering how weak it's been to begin with.


Lastly April Non-Farm Payrolls came in much weaker than expected as the economy only added 160,000 new jobs, which is well below estimates of 200k. This will probably give the FED some pause for a June rate hike. They've been putting the feelers with a few FED presidents making speeches recently to gauge reactions. As I've stated before I think the rise up will be much more gradual than anticipated. The market clearly agrees as most people don't expect a rate hike until the back half of 2016. Either way it's disappointing to see such weak job gains. As the economic engine for the world a number like that is very dis-heartening. No wonder why so many people are turning out in force to support Trump and Sanders. They are fed up with mediocre job prospects. As a much more famous person has said "It's the economy stupid"


No comments:

Post a Comment