January 2011: The Chicago Purchasing Managers reported the CHICAGO BUSINESS BAROMETER improved to its highest level since July 1988, indicating expansion for a sixteenth consecutive month.This is a great report, plain and simple. It indicates the manufacturing sector is starting to hit on all cylinders.BUSINESS ACTIVITY:
- PRICES PAID indicated increased inflation, increasing to the highest level since July 2008;
- EMPLOYMENT strengthened to a height not seen since May 1984;
- NEW ORDERS increased to the highest point since December 1983;
- PRODUCTION improved with NEW ORDERS to the strongest level since 2004;
For more on manufacturing, see this summation of the latest Beige Book numbers.
Going forward, there are two big road bumps.
1.) China slowing down: China has been a big driver during the current expansion. However, they are seeing higher then desired inflation levels, meaning their central bank is going to start increasing rates. The country will still be growing at strong rates; just not record breaking rates.
2.) Commodity prices: input prices are increasing, but with high unemployment there is little ability to pass the increases onto purchasers. There is some slack in the system according to the latest capacity utilization numbers, but that won't last forever. In addition, the latest Beige Book report indicated that in some districts, capacity utilization is near pre-recession levels.
5 comments:
Looks like oil prices could very well absorb the gain employers get from the payroll tax cut. Brent crude topped $100/bbl.
How wonderful. We cut the payroll tax, and Social Security projects its first deficit ever, while the revenues go to the big oil cartel.
I'm thrilled.
Oops.
Otherwise, it's a great report. I meant to mention that.
OPEC has stated they will increase production. In addition, prices were falling prior to the Egyptian situation. They hit support and have now bounced higher because of political tensions.
Yes, the psychological barrier $90 oil presents is something I remember being mentioned here. I thought it was a step in the random walk.
I talk lots about negative externalities of business, and sometimes (especially here) about the non-business events which affect markets. Weather, revolutions, etc. Today, we see sort of see both in action, flattening the markets. I think it was here that I mentioned businessmen scanning the shies for that meteor screaming at you, well, here they are.
Egypt figures large, both in the costs of meeting our geopolitical strategic goals and in the markets. I would imagine that right now, US diplomats and military liasons are speaking regularly to their counterparts in the Egyptian military to try and hold the situation together.
Mubarak will leave soon, and his son most likely won't succeed him. The uncertainties abound. They abound so much at the moment that CNBC's banner asks, "Time To Get Out of Emerging Markets?"
The trader consensus at the moment seems to be that overseas investments may be better toward the end of the year. A sea change in itself. Oil is giving back some of its gains (an increase in crude stockpiles in the US), and gold is down.
Both good signs.
Looking at oil prices right now, they are down sharply today, $1.51 to 90.68. There is still a lot of uncertainty over Egypt(not to mention the other factors, like the growing economy) that could drive prices higher, but that panic that pushed prices higher Fri and Mon, seems to have subsided for now.
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