Wednesday, May 29, 2013

Once again, the US consumer is expected to save the day

The "seasonal" manufacturing activity slowdown in the US (discussed here) has arrived on schedule. It is visible not just in the Markit PMI measure (below), but across other national and regional indicators as well.

Here are some recent news quotes on the subject:
  • CSM: - The Federal Reserve said that U.S. factories cut back sharply on production in April, as automakers produced fewer cars and most other industries scaled back. 
  • IBT: - A key index of U.S. manufacturing fell in April more than expected, the Institute for Supply Management said Wednesday. The ISM's purchasing managers index fell to 50.7 from March's 51.3, more that the 50.9 expected by analysts polled by Thomson/Reuters I/B/E/S. 
  • MarketWatch: — Manufacturers in the Philadelphia region reported fewer orders for their products in May and became more skittish about hiring new workers, offering further evidence the economy is struggling to grow. 
  • - Manufacturing activity in the State of New York fell unexpectedly last month, official data showed on Thursday. In a report, Federal Reserve Bank of New York said that Empire State manufacturing activity fell to a seasonally adjusted -1.4, from 3.1 in the preceding month.
But no worries. Why bother with manufacturing when US personal consumption remains firmly above 70% of the GDP.

The conventional wisdom goes that if the consumer is happy and in a spending mood, the US economy should grow. And given the ongoing rally in housing and stocks, American consumers seem quite happy indeed. Consumer sentiment hit a post-recession high this month (chart below). Now we just have to see if this happiness translates into sales.

Source: Econoday

Given these improvements in consumer sentiment, nobody seems to care much about the silly manufacturing slowdown. The consensus seems to be that the US consumer will come to the rescue once again.
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