Based on the better-than expected U.S. industrial output for July, Ryan Sweet, a senior economist at Moody’s Analytics said, “I don’t think we are headed for a second recession.” I suspect he has more data to back his assertion, but the reality that is becoming clearer and clearer to me is that no matter what the data, economics is an art, not a science. Notice his words, “I don’t think.” Those words just loudly ring confidence, surety, and definitiveness, don’t they?
And the beat goes on …
Manufacturing in the New York area contracted for the third straight month in August, data showed on Monday, tempering any lingering hopes for a rebound in the U.S. economy in the second half of the year
According to Millan Mulraine, senior U.S. macroeconomic strategist at TD Securities, “We’re still somewhat far off from getting into a double dip recession, but it suggests sluggish growth for the next quarter.” I suspect has more data to back his assertion, as well, but I find it interesting that when referencing data diametrically opposite from the July industrial output data, he speaks to the same conclusion – a double-dip recession is not ordained.
Ordained or not, the market seems to be thinking a double-dip recession is coming. Investors are running from mutual funds and flocking to bonds. U.S. bonds are reaching historic lows, and even European bonds are dropping in yield. The U.K. 10-year hit the lowest rate since 1989 today. It is either this, or there is a lack of confidence in the ability of the “governors” to fix the debt issues. Certainly, the Sarkozy-Merkel press conference yesterday did little to ease concerns about their needed role in fixing the European debt issues.
And the beat goes on …
The Labor Department said on Wednesday its seasonally adjusted index for prices paid at the farm and factory gate, excluding food and energy, rose 0.4 percent — the largest increase since January — after rising 0.3 percent in June.
Regardless of whether the market believes we are headed toward a double-dip recession, one indicator it does look at with wide eyes is inflation. The numbers above could explain the up then down in the market today. I would think the news would have already been baked into the cake, as oil prices have been high since the winter, but, maybe not. Either way, the indicator is lagging, as WTI oil prices have now been below $100 for some time, and they should go lower as the summer closes out. This should change the inflationary picture, yes? Oh my! Is that my optimism speaking again?
And the beat goes on …
Trade in the day – Invest in your life …
