Comments on Non-Mfg ISM

Looks from the chart we’re getting close to the post Bush tax cut, coming out of that recession highs, so we’re on track for our 3-5% read gdp growth guestimates.

And the high productivity reported today reinforces our thoughts on unemployment coming down only slowly as well.

Last time around the expansion phase of what became the sub prime crisis was a substantial contributor to private sector credit growth. Without that kind of contribution from somewhere else, this recovery could be more modest than the last.

For exports to be sustained, the govt would have to keep the dollar down with fx purchases and reserve building, which in my humble opinion isn’t going to happen. That means the adjustment takes place via a climbing US dollar that continues until it dampens exports. Much like what the euro zone has experienced for the last decade or so.

Karim writes:

Multi-year highs for overall index, new orders (3rd highest on record-chart attached), and employment.
Anecdotes also very positive.

  • “New initiatives creating increase in spending.” (Finance & Insurance)
  • “Indications are that business is picking up and that 2011 could see positive growth across many industries. We are seeing an increase in orders at the beginning of the year.” (Professional, Scientific & Technical Services)
  • “Starting to see higher prices in many areas. Low inventory levels are leading to longer delivery time frames.” (Public Administration)
  • “Business uncertainty seems to be subsiding.” (Management of Companies & Support Services)
  • “Business activity is picking up. The challenges in the textile market (cotton/polyester) are significantly impacting price along with the inability to secure pricing for a period longer than two months.” (Accommodation & Food Services)
  • “2011 looking better than 2010.” (Information)

Jan Dec
Composite 59.4 57.1
Business activity 64.6 62.9
Prices Paid 72.1 69.5
New Orders 64.9 61.4
Backlog of Orders 50.5 48.5
Supplier Deliveries 53.5 51.5
Inventory Change 49.0 52.5
Inventory Sentiment 60.0 61.5
Employment 54.5 52.6
Export orders 53.5 56.0
Imports 53.5 51.0

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3 Responses to Comments on Non-Mfg ISM

  1. danw says:

    I don’t know guys. I think the GFC is far more complex than macroeconomic indicators, and neo-classicalists for that matter, see. My take on the past few years is that the global financial system is increasingly unstable. These instabilities are caused by such things as lack of real government regulation, the Ponzi nature of private finance, rampant fraud in all nooks-and-crannies of the system, etc. MOST alarming is that central banks have addressed the crisis through monetary policies whose outcomes are difficult to predict.

    As everyone who reads this blog understands, once the various reserve accounts at the FED have been credited by monetary ops, and once those funds make it into the hands of those who might invest those monies (in equities or bond or commodities or currency markets), the control mechanism of the FED is eliminated. The FED can create the “liquidity”, but the FED cannot control how those monies are deployed.

    This is a classic destabilizing paradigm. Look at any system: take the Cold War and the build-up of nukes, for example. The .gov can build the weapons, but at some point the .gov (any .gov) must, by definition, lose control over an ever-expanding arsenal of weapons. The margin of error grows as the variability grows.

    The solution to the GFC, loose monetary policies, may succeed for some nations in the near term. But the longer term consequences of such actions are inherently destabilizing. Too much uncontrollable wealth in the hands of too many uncontrollable individuals and groups. Highly unstable.

    Pakistan is doubling its nuclear arsenal. Perhaps one way they can offset their own financial crisis is by selling a few bombs to the newly enriched, extremist speculators—made rich in part due to the accomodating monetary policies of the FED.


  2. Tom Hickey says:

    The GFC isn’t over yet, however. Zombie banks, clueless elites in business, finance, media, and government, and still some big shoes to drop.

    Here is Richard Koo’s latest Nomura letter.

    Turmoil results when policymakers do not understand balance sheet recessions


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