Monday, June 3, 2013

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


IMF Halves Germany 2013 GDP Estimate; Still Too Optimistic

Posted: 03 Jun 2013 03:08 PM PDT

With most of Europe in a nasty recession, and significant parts of it (Spain, Greece, Cyprus, Italy) in an outright economic depression, I wonder why it took so long for the IMF to Reduce Germany GDP Forecast.
Germany's 2013 growth prospects have been cut in half by the International Monetary Fund, as it warned that the outlook for Europe's strongest economy could worsen if a eurozone recovery fails to materialise.

 The IMF said falling business investment and the eurozone's ongoing recession, which have hampered German growth, meant the economy would grow by just 0.3pc this year, compared with an April estimate of 0.6pc.

"The uncertainty, mainly surrounding prospects for the euro area and the ongoing recession in the region, have led to declining German exports to the region as well as a sharp pull back in business investment," the IMF said in a report on Monday.
Ridiculous Talk of Uncertainty

Note the ridiculous talk about "uncertainty". What is certain is the IMF is in la-la land, attempting to paint a picture that does not exist.

It is all but 100% certain that a eurozone recovery is not coming, so warning that the outlook for growth "could worsen if a eurozone recovery fails to materialise" is like warning that it might hurt if you are punched in the nose by a professional boxer with full force.

Note too that Germany Q1 GDP Grew At 0.1%, missing expectations. That report came out on May 15, and the IMF just now figured out that German growth is slowing.

Given that Germany is headed for contraction, the IMF is still too optimistic.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Huge Miss in May ISM; Manufacturing Now in Contraction; What the Numbers Mean

Posted: 03 Jun 2013 09:09 AM PDT

US Manufacturing as measured by the May 2013 Manufacturing ISM Report On Business® is treading water barely above contraction.
Economic activity in the manufacturing sector contracted in May for the first time since November 2012, and the overall economy grew for the 48th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.
ISM at a Glance

Series DataApr IndexMar IndexPercentage Point ChangeDirectionRate of ChangeTrend (Months)
PMI™49.050.1-1.7ContractingFrom Growing1
New Orders48.852.3-3.5ContractingFrom Growing1
Production53.552.2+1.3ContractingFrom Growing1
Employment50.150.2-0.1GrowingSlower44
Supplier Deliveries48.750.9-2.2FasterFrom Slowing1
Inventories49.046.5+2.5ContractingSlower3
Customers' Inventories46.044.5+1.5Too LowSlower18
Prices49.550.0-0.5DecreasingFrom Unchanged1
Backlog of Orders48.053.0-5.0ContractingFrom Growing1
Exports51.054.0-3.0GrowingSlower6
Imports54.555.0-0.5GrowingSlower4


Synopsis

Last month I stated "Manufacturing employment has grown for 43 months. I expect that trend to break next month. Production was up but inventories were way lower. The drop in inventories, in conjunction with a big slowdown in employment, is likely a leading indicator of future production. The positive surprise that does not fit into the above assessment is that new orders grew at a faster rate. Next month may be telling. I expect the new order divergence to resolve to the downside as the global economy and the US economy are both slowing."

The consensus estimate was for slower growth, but here we are. Manufacturing is in contraction and the economy continues to weaken. Given the plunge in new orders and backlog of orders, jobs and the overall economy will likely weaken as well. Expect that trend of 48 months of economic growth to break next month.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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