Many brace for com­ing eco­nomic data

The Washington Times Daily - - Business -

This past week brought a rash of eco­nomic data that showed do­mes­tic man­u­fac­tur­ing con­tin­ues to im­prove even though Europe and Asia are weak and slow­ing, re­spec­tively. Oil and gas prices con­tinue to be at the fore­front of the con­ver­sa­tion this week even as fresh data showed that year-over-year growth in per­sonal in­come and spend­ing con­tin­ued to slow in Jan­uary, while the sav­ings rate dipped in Jan­uary com­pared with De­cem­ber.

I sus­pect that this week’s rear-win­dow-fac­ing eco­nomic data will pla­cate some, but many are al­ready brac­ing for what the next few months will bring. The net ef­fect has the Stan­dard & Poor’s 500 in­dex mod­estly changed com­pared with its close last Fri­day and the Dow Jones in­dus­trial av­er­age hov­er­ing around the 13,000 mark. This week we ex­ited Fe­bru­ary and, af­ter two months of trad­ing so far in 2012, those two mar­ket in­dexes are up 9 per­cent and 6 per­cent, re­spec­tively.

Ex­pand­ing on the above, data this week con­firms that the 17-mem­ber euro­zone is stuck in at least a mild re­ces­sion, as new or­ders con­tin­ued to fall. Markit’s Euro­zone Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex (PMI) rose to 49 last month from Jan­uary’s 48.8, but has now been be­low the 50 mark that de­fines growth or con­trac­tion since July. That was for man­u­fac­tur­ing, but the data for the ser­vices side of the Euro­pean econ­omy were not much bet­ter. Markit’s euro­zone Ser­vices PMI con­tracted to 49.4 in Fe­bru­ary from a read­ing of 50.4 in Jan­uary.

As if that were not bad enough, Euro­stat re­ported record-high un­em­ploy­ment in the euro­zone of 10.7 per­cent in Jan­uary, as well as an un­ex­pected in­crease in euro­zone in­fla­tion, with the con­sumer price in­dex edg­ing up to 2.7 per­cent in Fe­bru­ary as a re­sult of high oil prices brought on by a cold win­ter. It would ap­pear that de­spite some progress on Greece, Europe has yet to emerge from the prover­bial woods.

In and of it­self, that is not good news, but when we cou­ple it with slower growth in China, In­dia and some of the other emerg­ing mar­kets, it sug­gests that the global econ­omy may not be as strong as re­cent data may have led some to be­lieve.

We are near­ing the end of cor­po­rate earn­ings re­ports, so the ve­loc­ity of those re­ports will wane and the num­ber of eco­nomic re­leases will also dip next week com­pared with this past week. That slow­down will put even more em­pha­sis on two items next week — Europe and the do­mes­tic em­ploy­ment re­port for Fe­bru­ary, which is slated for de­liv­ery next Fri­day. Ob­vi­ously we all will be watch­ing the of­fi­cial un­em­ploy­ment rate as re­vealed by the Bureau of La­bor Sta­tis­tics, with a close eye not only on its com­po­si­tion but also on the par­tic­i­pa­tion rate, which has been fall­ing over the past sev­eral months and been wor­ri­some to many, my­self in­cluded.

Re­cent find­ings from Gallup sug­gest the re­cent trend of a de­clin­ing un­em­ploy­ment rate may change next week. Ac­cord­ing to Gallup data, U.S. un­em­ploy­ment rose in mid-fe­bru­ary to 9 per­cent, up from 8.3 per­cent for mid-jan­uary. Un­der­em­ploy­ment in mid-fe­bru­ary also rose, ac­cord­ing to Gallup’s find­ings, ris­ing 19 per­cent in mid-fe­bru­ary from 18.1 per­cent in mid-jan­uary. Also this week, Fed­eral Re­serve Chair­man Ben S. Ber­nanke warned of slow progress ahead on the jobs front and cau­tioned that im­prove­ment hinges on “stronger growth in final de­mand and pro­duc­tion.”

My con­cern about ris­ing gas prices at sus­tained lev­els from last week re­mains, and I con­tinue to see higher oil and gas prices re­duc­ing dis­pos­able in­come and driv­ing con­sumers to be more cau­tious once again about spend­ing. En­ergy prices at not only higher lev­els but higher sus­tained lev­els are likely to pres­sure prof­its at com­pa­nies, forc­ing a re-eval­u­a­tion of spend­ing and re­strain­ing hir­ing, par­tic­u­larly if de­mand winds up be­ing less than ex­pected in the com­ing months.

More com­ment next week as we get more from the ADP Em­ploy­ment Re­port and the Chal­lenger re­port on job cuts in ad­vance of the Bureau of La­bor Sta­tis­tics re­port on Fe­bru­ary job cre­ation.

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