The US economy looks increasingly stagnant as time goes on. The most recent data doesn’t bode particularly well. Here are some of the more important news items from this morning’s reports:
- Richmond Fed report was a disaster. At -17, the reading was substantially lower than expected. Econoday has some details:
“The Philly Fed a couple months ago was the first regional report that showed significant contraction in monthly conditions followed later by the New York Fed and now, dramatically, by the Richmond Fed whose manufacturing index fell to minus 17 to show very deep contraction vs only fractional contraction in June. New orders, the life blood of business, fell to minus 25 vs June’s already very weak minus 7. Backlogs, at minus 27, are extending their run of deep contraction.
Shipments show roughly the same degree of contraction as new orders while inventories are on the rise, a build that is likely unwanted given the weakness in orders. One positive, one that may not last however, is relative strength in employment though the Richmond Fed’s sample is adding fewer employees than in previous months.”
- Flash PMI for the USA came in at 51.8 – still not in recession territory, but certainly trending lower. Markit reports:
“The July Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) indicated the weakest improvement in U.S. manufacturing sector business conditions in 19 months, according to the preliminary ‘flash’ reading which is based on around 85% of usual monthly replies. At 51.8, down from 52.5 in June, the headline index was the second-lowest since the manufacturing recovery was first signalled by the PMI in late-2009 (only December 2010 saw a weaker PMI reading).”
- UPS, global economic bellwether offered a less than inspiring earnings outlook (via Business Insider):
“Increasing uncertainty in the United States, continuing weakness in Asia exports and the debt crisis in Europe are impacting projections of economic expansion,” said CEO Scott Davis.
“Export volume increased 0.8% over the same quarter last year. European growth was mostly offset by double-digit declines in exports from Asia to the U.S. and Europe. Non-U.S. Domestic volume, down 3.2%, reflected weaker economic conditions and continued yield improvement initiatives.”
Even more concerning, guidance was weak.
“As we look toward the second half of the year, customers are more concerned as greater uncertainty exists,” said CFO Kurt Kuehn. “Additionally, economic growth expectations have come down.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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