Let's take a look at the economic news from last week.
First, there were three macro-level release. The Chicago Fed National Activity Index improved a bit, but is still showing negative numbers. In addition, the three month moving average decreased to -.6. When the number moves below -.7, there is an increased likelihood of a recession. The Fed also released the Beige Book, which shows more slowing in the overall economy. Finally, the BEA released second quarter GDP, which was very disappointing 1.3% with a first quarter downward revision to .4% -- barely above stagnant.
Consumer Spending: The consumer sentiment indicator increased two points, but is still at very depressed levels -- where it has remained for most of the expansion.
Manufacturing: The Chicago Purchasing Managers Index decreased to 58.8 from 61.1. This reading still shows expansion, but the number is in a downtrend. Although still positive, the production and new orders components both decreased. The employment component decreased for the fourth consecutive month. Durable Goods orders dropped 2.1%. This data series has been moving more or less sideways for the last four months.
Housing: While new home sales decreased 1%, it's important to remember this series has been bumping along a bottom for some time. In addition, the Case Shiller index printed a second consecutive month of price increases. While this is to be seasonally expected, it could also indicate sellers are getting some pricing power back. But, we'll need to see several more months of data before we can say there is anything like a solid trend in place.
The overall tenor of last weeks news was negative. The macro indicators were extremely depressing, especially the massive downward revision to first quarter GDP. While manufacturing is still expanding, last week showed further signs of weakness. Housing was an odd bright spot with the price increases we saw, but we'll need to see those increase occur in non-peak seasons to demonstrate any real staying power.
