Five graphs on the ISM: Ouch it’s ugly

The synthetic index of the ISM survey in the manufacturing sector crashed in August. It is again below the 50 threshold. We can imagine that the recent improvement was temporary as the index was below 50 from October 2015 to February 2016. The August 2016 level is way below its historical average.
The drop in the ISM index reflects mainly the fragility of the domestic market as the new export orders index is stable above 50. This drop may be temporary but it shows that the American economic is not able to rebound strongly and permanently. That’s worrisome
I’m not sure that the US economy is close to the targets defined by the Federal Reserve and  mentioned recently by Janet Yellen and Stan Fisher. We will still have to wait before the Fed hikes its main rate if it does it. Continue reading

Euro Area: The manufacturing sector momentum falters. Rebound in the United Kingdom

The manufacturing sector momentum is faltering in the Euro Area in August but there is a real rebound in the United Kingdom.
The synthetic index for the Eurozone was at 51.7 in August after a local peak at 52.8 last June. In the UK, the index is at 53.3 way above the July figure of 48.3 that followed the referendum on Brexit.

The first graph shows indices in the main countries of the Euro Area. Germany is robust with an index close to 54 (53.6). But there is a significant drop of the Italian index which now is below the threshold of 50. It’s the first time since January 2015. The Spanish index is at 51 for the second month in a row. Such a weakness hasn’t been seen since the end of 2013. France is in a “comfortable place” under the threshold of 50 since March 2016.
We see that France has not been able to follow the Eurozone momentum since at least the beginning of 2014. It must be a concern in France at the eve of the presidential election. Continue reading