Tuesday, July 14, 2015
Well, Goodness Gracious, Father Ignatius
If you don't know that limerick, count yourself blessed. I am certainly not going to enlighten you.
NFIB's Small Business report took a frank dive in June. Except for the credit constraints, which are non-existent in this report, it agrees well with NACM CMI. Unfortunately, that agreement implies a poorish third quarter.
This is still one of the "small" samples - the next large one will show up in next month's report.
Sales expectations are sharply lower, reversing the gains of the last couple of years. Actual earnings and sales experienced a very sharp one month fall, thus lowering expectations.
The pricing pressures and compensation pressures continue - outlook fell from 98.3 last month to 94.1 this month. If confirmed by the larger sample next month, the economy is on thin ice.
Hah, I find myself trying to explain this one away. For about half the negatives, if you throw out last month you get a better signal. How's that? However, as with so many of my attempts to explain why economic reports aren't as bad as they seem, the bottom line is that for several months sales expectations have been sharply lower than they were last year at this time (8 and 7 points lower), so throwing this report out as an anomaly is probably not the wisest thing to do.
I'll carry it as a negative uncertainty.
The last JOLTS reported a significant drop in the hiring rate for professional and business services in May. That wasn't a particularly good sign, because openings are high:
When you see a persistent gap open, generally the economy is worsening. This hires category peaked in October - I still have the peak in this business cycle as last November!! The distance between wave peaks is getting too long!
We are definitely not going to get a whole lot of external help in this tight spot. The global economy is worsening with some determination, and China is the major driver. The only bright spot globally is that the Indian monsoon has been quite good to date - better than predicted.
Singapore reported Q2 advance GDP. I still regard it as an excellent indicator for the Asian economy as a whole, and while it had shown signs of weakness before, it is now contracting. Quarterly GDP is reported at -4.6%, with a continuation of the manufacturing contraction, but this quarter services and even construction decided to jump on the contraction train.
I had been reading reports that Singapore high-end commercial rents were falling with rising vacancies, so I am not surprised.
Chinese auto sales (from Trading Economics) show that the theory that consumer demand is going to keep the economy just clipping along are highly, highly suspect:
Came a scream that resounded for miles.
Said the curate, “Good gracious!
“Has Father Ignatius
“Forgotten the Bishop has piles?”