US PMI lifts a little in May

IHS Markit has released its provisional ("flash") estimate for manufacturing and services in May.  Both indicators rose a little from the April lows, but are still well below the 50% "recession line".  In other words, the economy is still falling, only not quite as fast.  As I expected, my extreme-adjustment algorithm, which, when it just had April data  removed a lot of the decline, now assumes that the decline is not just a one month aberration.  The difference between the extreme-adjusted and unadjusted manufacturing PMI is shown in the first chart, the average of the extreme-adjusted services and manufacturing PMIs in the second.

April was prolly the low point, but remember, as long as the PMIs are below 50%, it means that the economy is still contracting.  Because most surveys ask only whether sales/production/employment, etc., is up or down on the previous month, and not by how much, even if PMIs (not just the USA's) are above 50%, it doesn't necessarily mean growth is strong.  On the other hand, it is true that if lots of companies are reporting that their positions have improved from the previous month, then it is likely that growth is strong-ish.  A PMI above 55% is usually a sign of reasonable growth.  In 2009 ( during the GFC) it took 6 months for the US PMIs to recover to pre-crisis highs, but 6 quarters for GDP to reach the 2007 high.

I still suspect that the recovery will be slower than the crash.  And we still don't know whether the coronavirus will surge again as lockdowns are lifted.  Will we have a "double dip"/ "W-shaped" recession?  We often do.  I think a V-shaped recession is unlikely.  Economic growth won't return to normal until a working vaccine is available.