Wednesday, May 19, 2010

Morning Coffee: ISM Data and Consumer Confidence Index indicate Hope

The latest ISM Data and spending index should be good news for i banks down the line.....Oddly, good PMI and jobs data are not getting the traction they ought to have deserved as fiscal abilities of governments are coming under renewed focus...

First off, As CNBC said last morning, some of the biggest US companies are taking signs of an economic slowdown to heart, scaling back on their earnings projections anticipating tougher times ahead. The debt situation in Europe, the withdrawal of government stimulus, and lately fears of a deflationary implosion are giving jitters sending investors looking for cover.  Bonds seem to come across as a haven in a low yield and apparently deflationary economy. The Gordian Knot is growing tighter and not looser....

Recovery? ISM and Jobs indicate so: As the above chart shows, at 60.4 the ISM index is at its highest since 2004. According to the ISM, a PMI in excess of 42%, over a period of time, generally indicates an expansion of the overall economy. The current figures show an expansion in the manufacturing sector for the ninth consecutive month. According to ISM, The past relationship between the PMI and the overall economy indicates that the average PMI for January through April (58.7%) corresponds to a 5.6% rise in real GDP. In addition, if the PMI for April is annualized, it corresponds to a 6.2% increase in real GDP annually.

The recovery (nascent though) more closely resembles the “new normal” that executives at bond giant Pimco have predicted with embedded fears about sustainablity. Most recently, those fears have manifested in weak outlooks from some key companies.

The debt problems in Greece, Spain and elsewhere have spun a whole other set of worries, primarily centering on an economic slowdown that might snowball... despite a whole lot of encouraging indicators

Consumer Confidence Index up at 61.4: According to Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumer confidence, which had rebounded in March, gained further ground in April. The Index is now at its highest reading in about a year and a half (Sept. 2008, 61.4). Consumers’ concerns about current business and labor market conditions eased again. And, their outlook regarding business conditions and the labor market was also more positive than last month. Looking ahead, continued job growth will be key in sustaining positive momentum." (Thanks to the Conf. Board for permitting the quote)

I wonder what is it with all these doom prophets....But I will explain how to read data in another is important to make one own's deductions rather than get influenced

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