Wednesday, May 27, 2009

Empire State Survey Suggests Recession is Ending

NY Fed Empire State Manufacturing Survey -- The future general business conditions index rose 11 points in May to 43.8, its highest level since November 2007 (see chart above). This index has shown a cumulative increase of more than 40 points over the past two months. The future new orders and shipments indexes have followed a similar path. The future prices paid index remained modestly above zero, while the future prices received index remained just below zero. The future employment indexes were both positive. The future index for number of employees rose for a third month, to 0.7, and the future average workweek index dipped to 4.6. The capital expenditures and technology spending indexes were little changed from last month, both holding just below zero.

MP: The last time there was a two-month increase of more than 40 points was November 2001, at the tail end of the 2001 recession.

16 Comments:

At 5/27/2009 9:11 AM, Anonymous Anonymous said...

How can this be? The "economists" that post their comments on this site keep telling us the green shoots that keep sprouting up day after day are all just wilted weeds.

 
At 5/27/2009 9:34 AM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 5/27/2009 10:43 AM, Anonymous Anonymous said...

You want hard data? OK, here are 15 green shoots that economists use as indicators of an economic turnaround:

1. Baltic Dry Index is rising
2. Index of Leading Indicators is rising
3. Global markets - especially in more risky assets like emerging markets - are rising
4. Treasury bond yields are rising
5. Retail sales are rising
6. Housing affordability is at/near all-time highs
7. Upwardly sloping yield curve means banks are making money and which has preceded economic recoveries
8. Swap spreads are contracting
9. Libor rates are falling
10. Initial unemployment claims have peaked and are trending down
11. Consumer confidence is rising
12. Commodities are rising
13. VIX is falling
14. Corporate earnings estimates are rising
15. Sharp increase in the money supply

I've got more, but I think I've made my point. If we aren't already out of the recession, we will be very, very soon.

 
At 5/27/2009 11:01 AM, Blogger Size said...

"Global markets - especially in more risky assets like emerging markets - are rising"

Money has been pouring out of Treasuries and into the stock market (which now stands at historically high P/E, BTW). Higher risk emerging markets have a high beta to the U.S. market. Of course, they're going to rise - and by more than the U.S.

"Treasury bond yields are rising"

With Terrible implications for the Dollar and for long-term interest rates.

"Retail sales are rising"

Great. So, we've encouraged people to spend in the face of fewer jobs and lower real incomes. That has never caused problems before....

"Upwardly sloping yield curve means banks are making money and which has preceded economic recoveries"

Which implies higher inflation and high interest rates for mortgages.

"Housing affordability is at/near all-time highs"

Wait until the effects of the steepening yield curve and rising Treasury yields combined with fewer jobs, lighter paychecks and higher taxes kicks in.

"Swap spreads are contracting"

Government is the new lender. Why not?

"Libor rates are falling"

Government is the only lender.

"VIX is falling"

Welcome to the new bubble. Risk is good because everything is government backed. No moral hazard to see here. For now...

"Corporate earnings estimates are rising"

Corporate earnings beat expectations due to unsustainable cost cutting. Revenue came in way below expectations.

"Sharp increase in the money supply"

Inflation is awesome.

You've made your point. Inflation is coming and the currency is being debased. The green shoots are really green slime oozing from the Fed. With lipstick on it.

 
At 5/27/2009 11:17 AM, Anonymous Anonymous said...

Posters like Size - with his palpable negativity and numerous inaccuracies - is the reason why Robert Miller has no problem having "the vast majority of other commenters in partial to total agreement." Mr. Miller's preachin' to the Roubini kool-aid drinkers!

Sorry, Mark! I tried, but there's no getting through to the nattering naybobs of negativity! Looks like you're stuck with them!

Now if you'll excuse me, I have some short sellers to squeeze...

 
At 5/27/2009 11:36 AM, Anonymous Anonymous said...

The Chicago Fed National Activity Index suggests the recession is not ending.

This index has been published for decades longer than the Empire State Index and it is a national index. Pay particular attention to the business cycle chart.

 
At 5/27/2009 1:00 PM, Anonymous gettingrational said...

Anon. 11:36 am cites the Chicago National Activity Index as non-green shoot. This is contradicted by the headline for the survey results: "Index shows economic activity has improved in April".

The Business Activity Chart is not above the negative area which would indicate we are out of a recession. The green shoot analysis being presented is that we are coming out of a recession but it has not ended.

Thus, we can add this index to the other anons list.

 
At 5/27/2009 2:03 PM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 5/27/2009 2:17 PM, Anonymous Anonymous said...

Are you incapable of reading a chart, gettingrational? Apparently so. Let me go real slooooow for you and paste the data money quote:

A CFNAI-MA3 value above +0.20 following a period of economic contraction indicates a significant likelihood that a recession has ended.

The latest CFNAI-MA3 reading is -2.65. The evidence is palpably non-existent that the 85 indicators tracked by the CFNAI signal an April trough.

 
At 5/27/2009 2:36 PM, Anonymous gettingrational said...

Anon., even slower for you: Your site indicates we are coming out of recession. I don't see anyone writing the recession is over, only the signs it is ending. Have an anonymous day.

 
At 5/27/2009 3:56 PM, Blogger Robert Miller said...

This comment has been removed by the author.

 
At 5/27/2009 3:58 PM, Anonymous Cheech (in) Marin said...

"Palpably nonexistent"

??

Someone needs a dictionary and a timeout.

 
At 5/27/2009 4:08 PM, Blogger PeakTrader said...

The economic recovery is inevitable. The question should be what will the recovery look like? Under Clinton, the U.S. had a "superbubble" from 1995-00, at the tail end of a spectacular structural bull market, where U.S. actual output generally exceeded potential output. Under Bush, we had another superbubble, in a structural bear market, that began in 2000, where there was a strong expansion of the real goods market, real asset booms, and a steeper rise in U.S. living standards than 1995-00, along with the greatest global economic boom in history. Obama will spend trillions of dollars and micromanage the economy. So, if we don't get another superbubble, from 2009-14, that at least matches the prosperity of 1995-00 and 2002-07, Obama should be the biggest economic failure in U.S. history (a strong recovery is more likely after a severe recession).

 
At 5/27/2009 6:04 PM, Blogger Craig said...

There's only one sentence in that piece that means anything.

The capital expenditures and technology spending indexes were little changed from last month, both holding just below zero.Until manufacturers begin to spend on capital goods, there won't be any real growth.

 
At 5/27/2009 6:43 PM, Blogger Alan said...

"The capital expenditures and technology spending indexes were little changed from last month, both holding just below zero.Until manufacturers begin to spend on capital goods, there won't be any real growth."

I think some of this has to do with the way supply chains work today as opposed to even 10 years ago. We are seeing inventories slashed, so companies will have to eventually get back to making things - but we'll probably see the first signs of that activity overseas as the "pull" indicators are sent back through the chain.

However, I think the chain will take longer to restart than it did to slash the production -- in one example, Best Buy commented that they could have sold more of some items this past quarter, but that they didn't have inventory (because of the wholesale cuts in production in reaction to the consumer spending panic).

 
At 5/30/2009 7:26 AM, Blogger marketdoc said...

There has been much data posted on this blog for the past several months which shows the recession is ending. Keep up the great articles M.P.! Very informative.

 

Post a Comment

Links to this post:

Create a Link

<< Home