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US Macro Weakest Since July 2011 As Goldman Affirms Global Economy In Contraction
Goldman's Global Leading Indicator (GLI) final print for February affirms the global economy has entered a contraction with accelerating negative growth. Just six months after "expansion", the Goldman Swirlogram has collapsed into "contraction" with monthly revisions notably ugly and 9 out of 10 components declining in February. Some have suggested, given US equity's strong February (buyback-driven) performance, that the US economy will decouple from the world... or even drive it.. but that is 100% incorrect. US Macro data has fallen at its fastest pace in 3 years and is at its weakest level since July 2011 as 42 of 48 data items have missed since the start of February.
With 9 of 10 components negative in February, Goldman's Swirlogram has collapsed from expansion to contraction within just 6 months...
First negative print since 2012 - indicating global industrial production is set to contract...
What is the GLI: The Global Leading Indicator (GLI) is a Goldman Sachs proprietary indicator that is meant to provide an early signal of
the global industrial cycle on a monthly basis. There is an Advanced reading for each month, released mid-month, followed by the Final reading, released on the first business day of the following month.
* * *
But for those who look at US stocks and somehow believe America is an island economy capable of decoupling from the world... think again - it's all a lead-lag cycle and the global contraction blowback is boomeranging back to US data...
Today was ugly... nowhere worse than spending...
For the first time since Q1 2009 (i.e. post Lehman), we have just had back to back drops in consumer spending...
The Bloomberg US Macro Surprise Index just dropped - after today's dismal data showing - to its lowest absolute level since July 2011. The last 3 months have seen it fall at the fastest pace sinceJuly 2012. Notice the lower peaks and lower troughs on each cycle since 2012...
Note: this index tracks not just miss/beat but absolutepositive or negative data items - key to the cyclical aspect is the over-optimism and over-pessimism of economist's forecasts. The last 3 years (lower peaks and lower troughs) suggest economists are strongly biased to over-optimistic forecasts and normally this kind of drop woul dhave stopped but economists continue to look for hockey-sticks which, perhaps, in this case will be absent (and have been for a month).
But of course that doesn't matter...
A reminder of how this happened (clue: non-economic buyers)...
From the start of February...
MISS
- Personal Spending
- Construction Spending
- ISM New York
- Factory Orders
- Ward's Domestic Vehicle Sales
- ADP Employment
- Challenger Job Cuts
- Initial Jobless Claims
- Nonfarm Productivity
- Trade Balance
- Unemployment Rate
- Labor Market Conditions Index
- NFIB Small Business Optimism
- Wholesale Inventories
- Wholesale Sales
- IBD Economic Optimism
- Mortgage Apps
- Retail Sales
- Bloomberg Consumer Comfort
- Business Inventories
- UMich Consumer Sentiment
- Empire Manufacturing
- NAHB Homebuilder Confidence
- Housing Starts
- Building Permits
- PPI
- Industrial Production
- Capacity Utilization
- Manufacturing Production
- Dallas Fed
- Chicago Fed NAI
- Existing Home Sales
- Consumer Confidence
- Richmond Fed
- Personal Consumption
- ISM Milwaukee
- Chicago PMI
- Pending Home Sales
- Personal Income
- Personal Spending
- Construction Spending
- ISM Manufacturing
BEAT
- Markit Services PMI
- Nonfarm Payrolls
- JOLTS
- Case-Shiller Home Price
- Q4 GDP Revision (but notably lower)
- Markit Manufacturing PMI
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Of course, earnings expectations are not encouraging...
* * *
But apart from that... everything is awesome.
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Baltic Dry Index is 39 points points off its (all time) low.
Let the good times roll.
http://www.bloomberg.com/quote/BDIY:IND
Surprise surprise surprise! sergeant carter
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I'm game. Wire me my $8,000 check and I'll start posting on ZH as well.
Market to jump up 200 points tomorrow on this bad news...
BTFD you can't use any data prior to the end of 2011 for comparison to market activity. That is when the FED jacked directly into the markets via software and connected the indexes to an infinite supply of fiat.
Not to worry. US corporate management will further reduce worker income this month by shipping the few remaining good jobs overseas. With this new incentive, they believe the economy should take off.
Yep. And the federal government with the EPA, OSHA, EEOC, NRLB, DOJ, HHS, IRS, and on, and on, and on, will continue to make sure that companies can not survive in the U.S. Therefore, the companies will continue to have to move to countries that want jobs and businesses.
Yeah, it has nothing to do with short sighted greed and the goal of maximizing profit, it is all the government's fault..
Before ACA these companies never shipped job overseas. During the Bush credit bubble economy they had record earnings, and yet how many jobs were sent overseas? Next time you need hardware/software support say hello to Sanjay for me.
True story, I was having trouble setting up a network with my new router. I called the router company's customer service and some guy in India who was obviously reading off of a cue card answered the phone. I basically rushed the half wit off the phone and eventually figured it out on my own.
Bobbyrib stated: "Before ACA these companies never shipped job overseas"
Wow. That was stupid. How can you possibly think that Obamacare is the only government overreach that helps send companies overseas? No point in reading any more of your ramblings when you start out with statements of a complete moron. As I said, the slew of government agencies all squeezing companies for more paperwork, higher expense, more regulation causes businesses to look elsewhere to operate.
Completely dismiss my argument, but do not for one second list any of the regulations "forcing" companies to push labor overseas.
NASDAQ must hit ALL TIME HIGH before it is allowed to collapse. Just remember to BTFATH and you'll be all right. Goldman thanks you. I thank you.
That all looks like one awesome freaking excuse to fire up the printers again to me.
Onward to the next level(s) of money printing.
QE4,QE5,QE6,QE7,QE8,QE9......QE20.
Seriously, logging into Zero Hedge is like I'm in the FUCKING MOVIE GROUNDHOG DAY!
It's a parte' fed's buyin
this time is different and the "markets"will correct or crash if you will
My 401(k) is 100% in a stable value fund, paying 3.10% interest.
I am ***NOT*** interested in investing any of my money in any 401(k) mutual funds. Reason being --- these muthafuckas could pull the trigger at any moment and I won't be able to get out, because all 401(k) funds are calculated at the NAV at the END of the DAY. If you need to SELL it, then you are stuck with what the NAV is when they calculate it AFTER the market closes.
Thats great if you made 10%. I'm happy for you.
Me????
I'll take my measly guaranteed 3.10% and be done with it.
Why?
Because the 3.10% is guaranteed whether this shit goes up or it goes down, and I can sleep at night.
Are you familiar with the concept of 'normalcy bias'?
If you are referring to your "stable value account" by a guaranteed interest rate, you are likely participating in a TIAA-CREF plan. Am I right?
If so, it is an ANNUITY, not a mutual fund, as you correctly point out.
And it is backed by the "strength and claims-paying ability of the insurance company that issues it". In this case, I'm guessing, TIAA-CREF. If you think they're immune to downturns, then that's your call.
You should also be aware that the interest rate on your Stable Value account is the GROSS interest rate credited. It is reduced by administrative fees for running the plan.
Additionally, you should be are that TIAA-CREF quotes your AVERAGE interest rate across all the deferrals you have made into it since you joined the plan. Your deposits individually earn whatever the declared rate was at the time you put them in. Your current deposits (the one you are putting in with your next paycheck) are credited at the TODAY CURRENT declared rate. Which happens to be about 1.9% on the TIAA-CREF Stable Value Account. You will see your interst rate slowly decline over time as more and more of your deposits go in at lower and lower interest rates. What you think is a measly 3.1% does not, in fact, even have that much meat on the bone.
Oh, by the way, if it's the TIAA Traditional Account (and not actually the Stable Value Account) you also have a 10 year wait period to get your money out of it. Not even a surrender charge you can pay to get out quick. You literally can not take more than 10% our per year.
Just through you might like to know what you're ACTUALLY signed up for.
If I am WRONG and your stable value account is NOT from TIAA-CREF you should be aware that any account with a guaranteed interest rate can ONLY be issued by an insurance company and the rules of how it operates are likely very similar.
Signed,
Someone with knowlege of the matter
Its not TIAA-CREF. It's a Mass Mutual SAGIC II Bond fund. Its basic, its simple. It just pays interest... 7 days a week. I'm not hung into anything. I can transfer all of the the money to something else in one day without penalty if I choose, but right now I don't choose to do it because it pays interest every day seven days a week, and I don't have to worry about it. Every day, seven days a week, my account balance grows. Right now by about 57 dollars a day... 7 days a week, every day seven days a week. It never goes down. It just grows... more and more every day.
Is there some kind of problem with that?
He's basically saying that if Mass Mutual goes out of business (like AIG almost did), then you are fucked anyway.
Curious about what's in your fund? Is 3.1% an interest rate? If so, they are sitting on the long end of the curve. Are you sure that's safe?
Our 401(k) masters mixed things up a few years ago and brought us a gift from JPM - a money market fund that pays .01% and has a .1% fee. I said you've got to be fucking kidding!
I didn't even know we were in recovery.
Hmmmm. Who wooda thought, after pumping all of that fiat.
The buck bang of the fiat coke is compressing. I find the 'troughs' also becoming lower threshold and duration.
And aside from all the reports, data points & endlessly manipulated BS stats from .gov - go outside and sniff the air and check out the locals.
The economy is gasping - you can feel it. People are worried. What's happening to the S&P is irrelevant to most. Q1 and 2 are both negative I wager.
can't wait to see who's swimming naked in these waters when the tide rolls out... hopefully she's pretty and has big boobs.
It just might be...Janet Yellen.
Do Zombies get worried? A rather interesting question at this point. Mish kindly provided a video of Bill Gross in his new "Truthy" Janus role. It really looks like Gross can add a "ZhD" to his signature these days. Funny how this is trending. Anyway thank you Mish for posting this and thank you Gross for ZH style truthiness to the trends. As for the Zombies - my guess is that they aren't all that thankful - if they can feel anything at all...
Here it is. Worth a listen. And it has the Empty Plate image LOL.
http://globaleconomicanalysis.blogspot.de/2015/03/bill-gross-too-much-de...
ZIRP / NIRP: " You know, it keeps zombie corporations alive because they can borrow at 3 and 4 percent, as opposed to the 8 or 9 percent. It destroys business models. It's destroying the pension industry and in the insurance industry because, you know, basically, their liabilities can't be -- they can't be provided for by very low interest rates.
And ultimately, I think it destroys, you know, the capitalistic model at the margin. You talk about stocks and cheap money, they're basically corporations, instead of investing in the real economy, can now simply borrow at, you know, close to 0 percent and buy their own stocks, which yield 2 or 3 percent on a dividend basis and, you know, provide a return of 6 or 7 percent on an earnings to price ratio basis.
So, you know, there are a lot of negatives in terms of 0 bound interest rates. And I think one of the reasons why the Fed will move is to -- to sort of gradually move away from those negatives. "
check out the central bank damage in Germany:
German DAX up almost 40% in five months
http://bullandbearmash.com/german-dax-374-months-thought-markets-central...
And just as Germany's poverty rate hit a record high.
http://www.zerohedge.com/news/2015-02-22/european-nations-poverty-rate-j...
#FUCKYOUYELLEN
Following our last week’s discussion of rising deflation in the major currencies’ economic domains, on Thursday we faced just another evidence of this disturbing trend: the US core CPI MoM went down -0.7% in January comp. with -0.3% in December, so the trend is apparently intensifying as dollar gets stronger and stronger.
Equitywise, problems created by stronger dollar were recently admitted by many American exporters and general manufacturers with significant shares of overseas sales (let’s recall that, as an instance, Apple (AAPL) enjoys around 60% of its sales outside the United States). For example, Hewlett-Packard Co. (HPQ), preparing for the complex division into two separate entities as part of its M&A affair, recently complained about what becoming a trivial problem – continuous strengthening of the US dollar. HP’s guidance reported that the continued appreciation of the U.S. dollar directly decreased the expected annual revenue by whopping $3.3 bn compared with the company's own forecast late last year. HP's net profit for the reported quarter was $1.37 bn, or $0.73 per share, compared with $1.43 bn, or $0.74 per share a year earlier.
In similar fashion, Herbalife (HLF) in its Thursday’s quarterly earnings report blamed the most in its lackluster performance the hard-to-deal-with dollar appreciation. Herbalife reported decline of its adjusted quarterly EPS by 11.8% to $121 m, or $1.41 per share. Some critics rushed to ridicule such a reasoning saying Herbalife simply missed its own guidance and no strings should be attached to that. However, it would be incorrect to expect foreign sales to be perfectly proportionate to the U.S. dollar performance: something that becomes too expensive for a customer simply gives up its space to more competitive merchandise, so relevant sales segment might easily go down to zero in some circumstances.
Last but not the least, struggling J.C. Penney (JCP) disappointed by another quarterly loss of $59 m, or 19 cents per share, also partially fingerpointing, among other factors, at slower foreign shipments.
Table. 1. Summary of the U.S. Blue Chips’ EPS Current/Previous Qtr, Average Deviations and Surprise Factors (cannot be shown in plain text mode)
Source: Bloomberg
What we see from the above table is that although the typical selection of the U.S. companies managed to beat the market expectations by average 2.3% QoQ, it showed earnings’ drop by 3.3% over the same period while at the same time the Dow Jones index rose +9.5%. This perfectly explains why investors are uncertain about sustainability of the current market trend.
Notably, the U.S. Fed’s chief Janet Yellen at her semiannual testimony before the U.S. Congress was reluctant to give guidance on the time frame of the first rate hike, despite she was rather optimistic on overall performance of the American economy. Why that mismatch occurred then? We suspect that a true reason was her wariness not to spook the stock market as persistent appreciation of the greenback evidently creates material obstacles for the expected monetary tightening. Indeed, markets have created very ambiguous situation: dollar was rising in anticipation of the rate hikes, but the rate hike proved to be highly contingent on the pace of the dollar strengthening, since what we see now – its excessive muscling against most currencies – acts as a big brake on the U.S. companies’ earnings.
Another spectacular ‘investment opportunity” is the global bonds with near-zero or even negative yields. Thus, on Wednesday the German government sold 5Yr notes at a negative yield for the first time in its history. Beginning in March, the ECB is aiming to make €60 bn a month in purchases of government bonds and other ABS to try to stimulate growth, so there is no much hope for improvement in this sense. Elsewhere the picture is not substantially more inspiring: the 10Yr US Treasury yield eased by 9% in Q4 2014 alone. Global investments are fluttering between a rock and a hard place: still lower bond yields in Germany, ahead of the ECB’s controversial move, drew some buyers into U.S. bonds and notes for relative value. However, in the longer run the bid-to-cover ratio at the Treasury auctions is falling for account of both primary dealers and non-residents, so there is very strong hint that global capitals are chasing other opportunities.
Speaking about commodity markets, just oil and gold now remain in the main focus, whereas the rest of them, including industrial metals and softs are dull as they are largely perceived as highly correlated with China’s macro data, and inversely – with the Dollar index, DXY. In terms of oil, it should be remembered that what we are seeing now is a tug of war between factors driving the oil price up and down. In the fast moving oil market much of the fundamental data only becomes available for general consumption at least one month in arrears. But EIA oil price data and Baker Hughes rig counts are available weekly and with much action going on it is worthwhile updating. On the one hand, enormously rising U.S. oil inventories are dragging the price of WTI lower, while on the other hand the decreasing number of U.S. shale oil rigs is pulling the price up. But market seems to allow one systemic error while assessing its near-term prospects. Indeed, one of the major beneficiaries of steadily rising oil prices is the oil futures market. Brent crude oil futures have spiked as much as 30% since the January lows, but prices are being kept low as a result of above-mentioned high EIA’s inventories. It is this inventory issue that is triggering these corrections in prices. However, the truth is that the U.S. inventories stay inside the States, so they cannot affect the supply/demand outside the country – particularly, the Brent pricing. That’s exactly what we see happening now: the WTI/Brent price spread is widening like it was back in 2011.
Conclusion: Reallocation of the global capitals will accelerate in the comings months, unless the U.S. dollar is going to moderate to its historically justified levels between 80 and 85 based on the DXY. This, in turn, will enable the Fed to resume its tightening rhetoric which will justify the currently poorly warranted valuations on the stock and bond markets.
Yellen/Clinton drown in mud when tide leaves