The Weekly View: Testing Levels; Beware the Crowd at Extremes
My thanks to Rod Smyth, Bill Ryder and Ken Liu of RiverFront Investment Group for their excellent timing letter. Here is a brief sample, concerning the US economy:
Economic growth slowing
The economy has hit a soft patch. This was evident in weaker-than-expected May data from the purchasing manger index (PMI) for manufacturing and the employment situation report. With government budget cuts likely on the way, especially at the state and local levels, and Federal Reserve balance sheet expansion (QE2) over at the end of the month, growth (and inflation) estimates are being ratcheted down. The Institute for Supply Management (ISM) manufacturing PMI fell 6.9 points to 53.5 in May. While above 50, thus indicating ongoing expansion, it does imply a sharp deceleration in business activity. In particular, the new orders component fell 10.7 points to 51, suggesting barely any future growth. The ISM non-manufacturing PMI fared better, rising 1.9 points to 54.6, and reflects business activity in the services sector that represents the bulk of the economy.
We have written that higher energy prices, central bank tightening in emerging markets and fiscal retrenchment in the developed world would slow global growth.
David Fuller's view his last sentence immediately above is very much in line with the Fullermoney view during recent months.
These and other issues are most frequently discussed in the daily Audios.
Don't miss the informative graphic in this issue of The Weekly View.