Mish's Global Economic Trend Analysis

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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 Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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 Data Apr Index Mar Index Percentage Point Change Direction Rate of Change Trend (Months) PMI™ 49.0 50.1 -1.7 Contracting From Growing 1 New Orders 48.8 52.3 -3.5 Contracting From Growing 1 Production 53.5 52.2 +1.3 Contracting From Growing 1 Employment 50.1 50.2 -0.1 Growing Slower 44 Supplier Deliveries 48.7 50.9 -2.2 Faster From Slowing 1 Inventories 49.0 46.5 +2.5 Contracting Slower 3 Customers' Inventories 46.0 44.5 +1.5 Too Low Slower 18 Prices 49.5 50.0 -0.5 Decreasing From Unchanged 1 Backlog of Orders 48.0 53.0 -5.0 Contracting From Growing 1 Exports 51.0 54.0 -3.0 Growing Slower 6 Imports 54.5 55.0 -0.5 Growing Slower 4 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 Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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