The PMI release for August suggested that the US economy was, strangely, picking up. Of course, that is still possible. Responding to every zig and zag of monthly data can be a mistake. And normally, that's not necessary: the big cycles in the economy are caused by shifts in monetary and fiscal policy, and these take months, sometimes many months, to take effect. We have plenty of time to see whether each little blip in the data is in fact important.
However, Trump's trade wars and the deportation of millions from the labour force is massively disruptive. It has short-term as well and long-term consequences. And by their nature, the short-term consequences should start showing up in recent data. Now, the theme seemed to be that up to the end of last year, there was a nascent economic recovery, in the USA, and globally. All the indicators were picking up. Then from February onwards, US indicators plunged, and the S&P Global PMI suggested that that plunge has ended and growth is once again accelerating. The latest ISM (Institute of Supply Management) manufacturing survey rose only a little in August. In fact, since January, the two time series have been moving in quiet different directions.
The chart below shows the extreme-adjusted S&P Global and ISM manufacturing survey results, and their average. Because an average of two times series which are (statistically) independent has a lower standard deviation (lower error term) than either separately, the line to focus on in the chart below is the thick green one.
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