Do You Believe In ISM Miracles? Goldman Doesn't
Given the better-than-expected ISM print earlier, one could be forgiven for believing that the US is just fine thank you very much. Our earlier discussion of the dispersion in the ISM sub-indices, and yesterday's discussion of the PMI 'catch-up' nature of the very recent pre-holiday seasonal orders given the unusual slump in October may weaken the decoupling view but strategists will extrapolate trends as normal. Whether you believe in tooth-fairies or decoupling, Goldman's Global Leading Indicator continues to accelerate downward and moved into negative territory for the first time since August 2009. Amid a broad deterioration in components their outlook for global growth remains soft.
Spot the odd-one-out. The export miracle remains in place but how much longer can we build it and hope they come?
Goldman Sachs: November GLI Weak
Headline Negative And Momentum Flat. Our November Final GLI headline came in at - .3%yoy, down from last month’s revised reading of 0.6%yoy. Monthly momentum rose slightly to -0.29%mom from October’s revised reading of -0.30%mom. Momentum has remained stuck in negative territory for eight months, and the Final reading with the full set of components shows a much smaller improvement than signalled by the Advanced report. Headline continues to accelerate downward and moved into negative territory for the first time since August 2009. We will be watching closely for more convincing signs of improvement in momentum.
Broad Deterioration in Components. Declines in six components were partially offset by no change in one and improvements in the other three, pushing momentum up (less negative) a touch in November. The S&P GSCI Industrial Metals Index® fell for the fourth consecutive month, while the TWI Aggregate fell to its lowest value since October last year. Our Global New Orders Less Inventories (NOIN) Aggregate fell back again after a short-lived upturn last month. Our Manufacturing Aggregate, Korean Exports and the Baltic Dry Index rounded out the batch of deteriorating components. On the other hand, our Global PMI Aggregate was flat in November, as weakness in the Euro Area and China were offset by a strong US ISM report. Our Consumer Confidence Aggregate rebounded, and US Initial Claims trended down for the second consecutive month. The Japan Inventory/Sales Ratio also improved slightly in November.
Outlook for Industrial Growth Remains Soft. The November Final reading of the GLI still shows the persistent weakness that has characterised the global industrial cycle for most of 2011. Headline has been falling for nearly a year and turned negative this month, and momentum remains firmly stuck in negative territory. Both headline and momentum are now at levels rarely seen outside recessions. The current impasse in momentum reflects, to some extent, the balance between a run of stronger than-expected US data and a marked deterioration in European indicators. Continued pressure from the European sovereign situation makes the future path of the GLI more uncertain, so we will be watching closely for any clear signal of marginal improvement or renewed deterioration in the months ahead.
Do you believe in decoupling miracles?
(h/t John Lohman)
- advertisements -