As we noted Monday, the soothing soothsayers have latched onto the few decent econo-data points amongst all the awful economic news as proof the economy is fine.
We’ve also heard the claim that the sudden increase in market volatility and global market turmoil were not signalling anything
These are a bit "head-in-the-sand" for my tastes.
A review the of the Macro data
suggests recession odds remain a much higher possibility than many realize. (And no, I do not mean a "33% chance").
My pal Nouriel notes the good and bad news:
Good Economic news:
The February manufacturing ISM surprised on the upside going back to a 52.3 level that is the critical contraction level of “50”;
• Existing home sales were up 3% in the last month;
• January personal incomes went up 1% while personal spending went up 0.5%;
• Mortgage applications were up 3% in the last week.
• The Conference Board’s January index of consumer confidence unexpectedly rose to a level of 112.5.
The Not-so-Good Economic news:
• The Q4 GDP growth estimate was revised from 3.5% to 2.2%
• Based on the Q4 growth revision all of the four components of investment fell in Q4: residential investment, business investment in software and equipment, non-residential investment in structures, inventories investment
• Inventory to sales ratios remain high – in spite of the Q4 inventory adjustment – so that further cutbacks of production to reduce inventories will be necessary in Q1 and Q2.
• Durable goods orders were sharply down in January including, most importantly, capital goods orders and shipments, good proxies for current and future investment. At current rates, real investment in software and equipment could be down 10% in Q1 alone. The sharp and unexpected fall in durable goods orders was a crucial trigger for the US stock market sell-off on Tuesday.
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There’s a full parade of horribles to check out, at RGE; these are the first four negatives of 15 or so — check out the rest for more details . . .
Hard Landing Recession Ahead
RGE | Mar 02, 2007