<<Chicago PMI was better though especially in the prices paid component. Last
month's number was a little alarming before the NAPM since it implied
manufacturing was coming back full steam all at once instead of gradually.<g>>>
I thought may be many on the thread will ignore your 'g' which is quite meaningful.. I would concur with 'Firstunion' economist analysis on consumer confidence report ...
The bottom line is that the Fed is probably focusing reports on the
industrial sector, which is where the economy's cyclical
impulse is generated. NAPM number will be quite important. The Conference Board's Consumer Confidence Index rose 0.1 to 135.8 in May,
as consumers' views of both current and future economic conditions improved modestly. May marked the seventh consecutive rise for consumer confidence, which is the longest string of increases ever tracked by the Conference Board.
The rise in consumer confidence basically throws cold water on the notion that consumer spending is about to weaken anytime soon.The survey took place before the Fed announced it was leaning in the direction of raising interest rates. A change in the Fed's bias, however,has historically not been enough to put a dent in consumer
confidence, it typically takes a rise in interest
rates to do that.
In my own opinion market is not yet prized for a rate rise.
Personal income not changing much and spending remained flat with Feb. so not accelerating.<g>
I think 'g' is rightly placed, look at this report by first union... downward revision masks strong doemstic demand and the GDP deflator for domestic purchases,now shown at 1.1% up from 1.0% accounting for the final 0.1 point of the downward revision. I hope the following will give the thread what is brewing inside the benign numbers.
Revised GDP & Corporate Profits (1Q)Downward Revision Masks Stronger Domestic Demand. Profits Moderately Better.
May 27,1999
The headline revision to 1Q real GDP growth was downward, to 4.1% annual rate from the 4.5% gain in the advance report last month.However, the slippage was due to slower inventory accumulation, a higher trade deficit,and a bit more inflation than originally reported.Our measure of "core" GDP, which is private sector domestic demand, showed a smallupward revision – to a 7.4% annual rate
from 7.3%.
Inventory accumulation, now shown at $39B down from $45B, accounted
for 0.2 points of the downward revision.
The trade deficit (o Net Exports in GDP jargon), now shown at $310B up from $305B, accounted for 0.1 point. And the GDP deflator for domestic purchases, now shown at 1.1%up from 1.0%,accounting for the final 0.1 point of the downward revision.
In our view, none of these revisions isvery important,except to note thatthe Fed will not be paying attention to the downward revision of the headline number,rather they will note the upward revisions to domestic demandand inflation. In that sense, it is not a good report for the financial markets.
The first look at 1Q Corporate Profits was also not as good
as the financial markets would have liked. There was a
rebound, up 3.9% from the 4Q (not
annualized).However, the Commerce Dept saidthat the 4Q profits were held down by $13.5B in settlement payments by tobacco
companies. Adjusting for that factor would reduce the 1Q increase to 2.2% from 3.9%.
The yr/yr trend did improve, showing a 2.9% increase However, that was well shy of the 10% type gain reported for the operating profits of the S&P 500 for the1Q. Also, the yr/yr gain was concentrated in Financial Industries, up 4.0%, while the Non-Financial sector still showed a modest yr/yr decline of 0.4% (4Q yr/yr decline was 4.3%). Non-financial profits as a percent of that sector's GDP inched up to 10.3% from 10.1% in the 4Q.
If there was good news for the financial markets in this report,
it was in the "nominal" GDP figures. The 1Q now shows only a 5.6% annual rate of increase and the yr/yr gain is only 5.0% (see bottom chart). In our view, that is a better target for the Fed than "real" GDP. If it remains near 5%, inflation won't be a serious problem.
<<All in all nothing to alarm Alan's friends or rumor mongers.<g>>>
The above clearly indicates that all is not well, here at 'Ideas' Alan's friends are watching developments very closely, may be a little more closer than what is epxected of them. I see a lot of alarming developments within numbers as such I am very cautious...and just wanted to explain your very rightly inserted 'g's'.... just to be sure that everyone clearly knows the pitfalls in front of us..
JT.. I think the issues raised above by Firstunion are valid and you need to read and interpret NAPM accordingly..
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