US slowdown

 I remain convinced that the US is slowing.  Just how deep the downturn is, I cannot tell, because there are so many factors changing so rapidly.  Trump's policies and policy shifts have damaged confidence and increased uncertainty, and there is no knowing when rational policy will be followed.  In the meantime, all we have is the current data.

The chart below shows the unweighted average of the ISM manufacturing and services surveys, and I have been following it for more than 20 years for its insight into what is happening in the economy.  

Note how the whole economy ISM had started to rise, but from February onwards has been falling.  The start of the decline coincided with Trump's inauguration.  This can be more clearly seen in the chart below, which shows the same data, but for a shorter period.

Of course, there are many indicators, and they show varying pictures for the first five months of this year.  But, as I said, I have followed this indicator for a long time, and it has proved reliable.  Note that I extreme-adjusted each time series before I added them together, but the extreme-adjustment process only slightly reduced the January observation for the manufacturing PMI from 50.9 to 50.3.
 

I'll keep you posted.

A marked deterioration in consumer views

 Hat tip to Carl Quintanilla

METLIFE: “.. a marked deterioration in upper income ($100,000+) consumer views on potential delinquencies, real income expectations, and job separation risk. “.. it may be the first real indication of the risk posed by the tariff noise ..”

OZ consumer confidence on the up

The ANZ/RoyMorgan Australian consumer confidence is rising from a deep low--the previous low this low was in the 1990/1991 recession.  As can be seen, it is a reliable leading indicator, for both recessions and upturns.  I recently concluded that Australia's long, draggy recession was over, as real GDP per capita had started to rise.  As can be seen, this was preceded by an upturn in the consumer confidence index.

Whereas consumer confidence has started to fall in the US, in Australia, it's still rising (data through March 2025)  Australia will be much less affected by Trump's trade wars than Canada or Mexico, or, of course, the US itself.

Click to enlarge.
My seasonal adjustment

Small business optimism falls in December

 he NFIB small business optimism index fell in December.   It has a clear lead to the cycle at the top, but is much shorter at the bottom.

Russia business confidence, and other things

 I've been off-line, more or less, due to medical issues, plus I also wanted to work on my Visual Basic programs, adjusting my seasonal adjustment programs to handle time series which go negative.  The latter took a lot of work, because the assumption that time series were positive (e.g, the PMI, or industrial production, say) was embedded in all sorts of small but crucial software segments.  Also, Visual Basic makes the strange assumption that zero ('0')is the same thing as 'empty', which it most emphatically isn't.  It took me hours to discover this!

Why did I want to be able to seasonally and extreme adjust time series which go negative?  Because I wanted (specifically) to analyse the Russian business confidence data, partly as part of my attempt to estimate the Russian PMI prior to 2011 (my data stop there) and partly because it will be interesting to see just how deep business confidence falls in Russia as the war progresses and sanctions bite, and (generally) because one does from time to time need to seasonally and extreme adjust time series which go negative. 

The chart below shows the original (unadjusted) data for business confidence plus my calculation of the seasonally and extreme adjusted data.  Note the very strong seasonal cycle, with business confidence plunging in winter and recovering in summer (why?  I know Russian winters are bad, but ....)  Also, business confidence has been more or less negative for the last decade-plus.  Which is consistent with the sharp decline in US$ GDP since 2013, after the annexation of Crimea. (GDP chart second below; note optimistic forecast for 2022 GDP!) 

Source: Trading Economics
If the 2011-2013 growth rate had continued, Russia's GDP would now be *double* what it is now.  Does Putin understand that in the long run, power comes from economic not military might?  That his yearning for great power status would come from sustained economic growth?  But that would imply the end of the kleptocracy, and we can't have that, can we?

How does business confidence compare with the PMI for Russia?  I show that in the chart  below.  I expect both the PMI and business confidence to fall sharply over the next 6 to 12 months.  How much of this is due to oil?  The oil price fell sharply during the GFC (2009), but recovered almost to previous highs  between 2010 and 2015, so the plunge in GDP and business confidence/PMI was due to the relatively mild sanctions imposed after the Crimean annexation, not oil.  The new sanctions are strong and will cut deep into Russia's exports.  In real (volume) terms, Russian GDP fell 10% in 2009.  I expect the downturn this time to be worse, and the recovery more sluggish.    

I'll keep you posted.

US Business confidence suggests ongoing eco decline

The chart below shows US business confidence (estimated by the OECD) relative to the year-on-year change in real GDP.  It leads GDP by 3 or 4 months, so its sustained decline points towards further economic slowdown.  We shall see whether business confidence recovers over the next few months.  I suspect it won't, thanks to the trade war.  Economic activity is just going to keep on sliding.

Das ist aber sehr schade!