After June's hope-strewn dead-cat-bounce, Philly Fed has plunged back to the lows of the year. Printing 5.7, missing expectations of 12.0, this is the biggest miss since January. It appears the weakness in Q1 (and Q2) and now Q3 was more than just weather... or port closures... as the employment index plunged to its lowest since January.
Next week's key events and data, if we can look beyond Greece and China.
Despite much hopeful banter among the mainstream media, Goldman forecast nonfarm payroll job growth of 220k in June, notably below consensus expectations of 234k. This is roughly in line with Goldman's expectations for below average job growth over the remainder of 2015. Employment indicators were mixed in June: reported job availability, the employment components of most manufacturing surveys, and ADP employment growth improved, but jobless claims and job cuts both rose slightly and online job ads declined. Overall, the June data point to a gain below the very strong 280k increase in May.
After 6 months of dismal data, Philly Fed bounced back in June. Printing at 15.2 against expectations of 8.17. this is the biggest beat of the year but remains below levels seen over a year ago. Tis will be celebrated we are sure as heralded Yellen's big comeback but under the covers, employment tumbled and Prices-Paid exploded higher by the most since 1973...crushing margins - hardly a sign of strength.
Moments ago the Fed's latest Flow of Funds report confirmed what the Philly Fed noted recently (and what blogger and Citadel trader Ben Bernanke vehemently denies): that the Fed keeps making America's uber rich ever richer, when in the first quarter thanks mostly to yet another $1.1 trilion increase in the value of financial assets (read stock market), the asset holdings of US households (or at least a very small subsection of them) rose by $1.6 trillion to a record $99 trillion.
With The Philly Fed admitting QE has been the driver of inequality in the USA and the Kiwis slashing rates unexpectedly, the fact that Reserve Bank of Australia Governor Glenn Stevens uttered the following is even more crucial. "I think it's a social problem," Stevens told the Economic Society of Australia, adding ominously, "I think some of what's happening is crazy," specifically pointing to Sydney property prices as an example. No matter where we look around the world, Central Bankers appear to be exercising their honesty glands about the impact of their policies. However Stevens can't help himself at the end, noting "we remain open to the possibility of further policy easing."
Oops, Sorry America!
As goes oil... so goes US equities...
Manufacturing PMI - Miss/Drop. Existing Home Sales - Miss/Drop. Philly Fed - Miss/Drop. Economic Confidence - Miss/Drop. Buy Stocks...
After a very modest bounce in April, Philly Fed fell again in May, printing a disappointing 6.7 (against 8.0 expectations). Philly Fed has now missed 5 of the last 6 (and 7 of the last 9) months. While new orders picked up, prices paid plunged at recessionary pace, inventories tumbled, and the average workweek slumped. Hope also tumbled as future expectations dropped.
As the economic calendar slowly picks up following the NFP lull, we are looking at a busy week both globally and in the US, where an army of Fed speakers culminates with a Yellen speech on Friday at 1pm in Rhode Island.
The last two months have been nothing if not a lesson in the disater that is the economic-forecasters of the world. With a 3-sigma beat followed by a 5-sigma miss, hope abounds that April will be the 'goldilocks' print - just cold enough to leave the Fed on hold and just hot enough to 'prove' growth remains. Goldman expects nonfarm payroll job growth of 230k in April, in line with consensus expectations. While labor market indicators were mixed in April, the employment components of service sector surveys were strong and better weather conditions should provide a boost. In addition, they see some upside risk to the forecast from a calendar effect, and expect the unemployment rate to decline by one-tenth to 5.4% and average hourly earnings to rise 0.2%.
Sentiment in general remains poor and all the focus is on gold's weakness in dollar terms, despite gold's strong gains in euro terms in 2014 and so far in 2015. Poor sentiment is of course bullish from a contrarian perspective and suggests all the froth has been washed out of the gold market.
After crashing from November to January (oh that's just weather), the Philly Fed factory index has failed to do anything but limp higher in the last 3 months. Printing at 7.5 in April (slightly better than the expected 6.0, Philly Fed continues to hover around 1 year lows. The post-weather rebound is entirely missing as New Orders plunged to 2 year lows (though employment surged) with more firms reporting price decreases than reporting price increases.