Mish's Global Economic Trend Analysis |
- China Manufacturing PMI Sinks to 78 Month Low
- Rate Hike Odds Shift to March 2016
- EU Ministers Ram Through Quota Plan Over 4 Objections; Fairy Tale Material; Mish Does "The Math"
- Richmond Fed Region Unexpectedly Bad; New Orders, Backlogs, Workweek Plunge
- Fed Household Spending Survey Projections in Firm Downtrend
| China Manufacturing PMI Sinks to 78 Month Low Posted: 22 Sep 2015 11:12 PM PDT If you think a global economic rebound is just around the corner, then please note China Manufacturing PMI is in contraction, and at a 78 month low. Key Points
In support of the idea that economic cheerleaders are nearly everywhere one looks ... Commenting on the Flash China General Manufacturing PMI™ data, Dr. He Fan, Chief Economist at Caixin Insight Group said: "Overall, the fundamentals are good. The principle reason for the weakening of manufacturing is tied to previous changes in factors related to external demand and prices. Fiscal expenditures surged in August, pointing to stronger government efforts on the fiscal policy front. Patience may be needed for policies designed to promote stabilization to demonstrate their effectiveness." Good Grief Mike "Mish" Shedlock | |||||||||||||||
| Rate Hike Odds Shift to March 2016 Posted: 22 Sep 2015 04:38 PM PDT Today we saw another stock market decline and yet another shift further away from rate hikes this year. I put this table together from CME FedWatch data.
The above table is a bit simplified because there is a chance of hikes higher than a quarter point. However, I believe it is safe to discount multiple hikes until we at least see the first one. December 16, 2015 Probability  January 27, 2016 Probability  As noted in the table at the top, one has to go all the way to March 16, 2016 before the Fed Fund Futures imply a quarter point hike. Also, and as I have pointed out before, when the Fed does move, there is no good reason to assume the first hike will be to the range 0.25% to 0.50% from the current 0.00% to 0.25%. Even if the Fed sticks with quarter-point ranges, the first hike (assuming there is one), may very well be to 0.125% to 0.375. That range would give the Fed a quarter point to play with and it would change the implied "no-hike" odds. The key point now however, is the increasing chance there is no hike at all. Mike "Mish" Shedlock | |||||||||||||||
| EU Ministers Ram Through Quota Plan Over 4 Objections; Fairy Tale Material; Mish Does "The Math" Posted: 22 Sep 2015 01:02 PM PDT EU Solidarity has splintered widely as Ministers Ram Through Refugee Quota Plan over the objections of numerous countries. EU interior ministers on Tuesday imposed a plan to relocate 120,000 refugees across the EU, outvoting four eastern European countries strongly opposed to the scheme.Fairy Tale Material The statement by Asselborn that the "EU expected objectors to abide by the redistribution plan, as required under EU law" is fairy tale material given statements by the Czech Republic and Slovakia and actions by Hungary. Actions Speak Loudly On Monday evening, Hungary, a transit country, stepped up its confrontational approach, passing a law that allows the army to use rubber bullets, tear gas and nets against migrants. Viktor Orban, prime minister, warned that the flow of people was "breaking the doors down on top of us". Budapest has previously taken steps to close its borders with Serbia, Croatia and Romania to try to stop the flows of migrants. "The Math" The Financial Times noted that another 3,000 to 4,000 migrants hit Greece every day. But there is no work in Greece and no money either. Ranko Ostojic, Croatia's interior minister, said he would call on Athens to stop moving Middle Eastern refugees to other parts of the EU. Excuse me for asking the obvious, but what the hell is Greece supposed to do with an influx of three to four thousand refugees a day but pass them on? And please do the math on that. 3,000 times 30 is a rate of about 90,000 a month. 4,000 times 30 is 120,000 refugees a month. The EU imposed a plan to relocate 120,000 refugees over the course of a year. Its plan will cover the inflow for a month or so. What then? As I have stated numerous times, there is an unlimited demand for free services. And please bear in mind there are some 4 million refugees waiting in the wings in Turkey, Lebanon, and other places. Potential EU Refugees The Mercy Corp provides this map to consider.  Map updated as of September 2015. More Math Counting just those in Turkey and Lebanon, there is a potential for another 3,111,752 refugees who may find free handouts from Germany and Sweden to their liking. If just 1/4 of them try, that's another 778,000 or so. Make it easy enough, and hand out enough free food, shelter, and services, and every one of them would jump at the chance. We are not talking about 120,000 a year. Rather we are talking about the possibility of relocating 3,111,752 refugees over the course of a year. That would be about 259,000 a month for a full year. Needless to say, quotas cannot possibly work. Question of the Day How is it that the EU nannycrats cannot figure out this simple math? Or have they figured it out but simply do not care, hoping it will solve the alleged "deflation problem" or further some ridiculous socialist goal? Mike "Mish" Shedlock | |||||||||||||||
| Richmond Fed Region Unexpectedly Bad; New Orders, Backlogs, Workweek Plunge Posted: 22 Sep 2015 11:29 AM PDT The already bleak manufacturing reports took another step for the worse today as evidenced by the Fifth District Survey of Manufacturing Activity by the Richmond Fed.  Volume of new orders, backlog of new orders, capacity utilization, and average workweek have crashed making the report details far worse than the headline reading. Nonetheless, manufacturers remain optimistic. "Producers anticipated positive business conditions for the six months ahead. They continued to expect steady growth in shipments and in the volume of new orders. The indexes for expected shipments and new orders strengthened to readings of 48 and 42, respectively." It's been amusing watching the look ahead projections in these reports. They have been consistently wrong for months on end. Economists Overoptimistic Too Manufacturers and economists alike have been overoptimistic about manufacturing. The Bloomberg Consensus reading for the Richmond Fed region was for a strengthening to +3. Early indications on the September factory sector are negative and now include a minus 5 headline from the Richmond Fed. New orders, unfortunately, are even more deeply in the negative column at minus 12 which points to even weaker activity in the months ahead. Shipments are already in the negative column for a second straight month at minus 3. And manufacturers in the region have already worked down their backlogs to keep up production with backlogs in deep contraction at minus 24 and minus 15 the last two months. Employment is in the plus column but just barely at 3 and it won't stay there for long if orders and production continue to weaken. Price readings are moderating further to round out an unpleasant picture of unexpected slowing.More regional reports will be out in the next week or so. There is no reason to expect any of them to be good. Mike "Mish" Shedlock | |||||||||||||||
| Fed Household Spending Survey Projections in Firm Downtrend Posted: 22 Sep 2015 02:43 AM PDT Fed Survey of Households Every month the New York Fed interviews a rolling group of 1200 people to produce a detailed Survey of Consumer Expectations. Interested parties can download the Survey Questionnaire PDF. The Fed states: Where existing surveys look at consumer sentiment and the decisions households make, their coverage of household expectations is limited; the Survey of Consumer Expectations seeks to collect information on a wide variety of consumer expectations – including inflation, future earnings, household income, house prices, access to credit, layoff risk and reemployment prospects, and US economic conditions overall. Through a set of quarterly special surveys it also aims to focus in depth on special topics such as household finances as well as labor and housing market issues and outcomes.NY Fed - One Year Look Ahead Spending Survey Projections  click on chart for sharper image Projections
Given the Fed places so much faith in various consumer confidence numbers, I have a simple question: Why don't they believe their own survey? Mike "Mish" Shedlock |
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