Consumer Spending: The BEA reported that real PCE decreased less than .1% in June, the second month of decline. The big drop occurred in durable goods. This means auto sales, which have dropped for two months. Part of the reason for this is the supply disruption issues in Japan, but there is also concern the consumer is starting to pull back on his spending. Auto sales were up a little over 6%, rebounding from two weak readings the previous two months, which was attributed to the Japanese earthquake an the fallout therefrom. This could lead to a decent rebound in PCEs next month. The BLS reported an increase of 117,000 jobs last month and a decrease in the unemployment rate to 9.1%. While not great, the report was not terrible either, placing in the luke warm camp of economic news.
Manufacturing: The latest ISM number printed a reading of 50.9, which is just above the level of contraction. However, the internals are slowing slowing down and the new orders number was below 50, indicating contraction. Part of this slowdown in US manufacturing is the result of a slowdown overseas. Both India and Brazil have printed an inverted yield curve recently, which is usually a good indicator of an upcoming slowdown and possible recession.
Service: The latest ISM reading printed 52.7, up slightly from the previous month. Both the new orders and employment numbers were positive, although they decreased from the previous month, indicating a slower rate of expansion. 13 industries were showing expansion and only 5 were showing contraction.
The sum total of last weeks' data is an economy that is slowing. However, note that both the manufacturing and service sector are showing growth, albeit it at a slow pace. The employment report tells us that employers are hiring, but reluctantly. But most concerning is the inversion in India's and Brazil's interest rate curve, which is not a good harbinger for their respective economies over the next 12-18 months.