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The Math Is Wrong

The Empire State Manufacturing Purchasing Managers’ index in June dropped from +11.9 to -7.9. The Philadelphia Federal Reserve Manufacturing PMI survey dropped from +3.9 to -7.7. The Chicago Fed National Activity Index remained negative even as it improved from -0.56 to -0.37. The Dallas Federal Reserve PMI slid from -7.4 to –17.5. Only the Richmond Federal Reserve PMI improved from -6.0 to +3.0. In between, the National Home Builders’ Housing Market Index (an index of confidence among Home Builders) dropped from 16 to 13, almost on par with the lows reached in the crisis year of 2008. The Initial Jobless Claims in the US – filing for unemployment compensation by first-time unemployed – has remained elevated throughout the last two to three months and has even picked up some momentum.

This is the backdrop for the Chicago Manufactuers’ PMI jumping and the National Institute of Supply Management PMI rising, confounding these data and market expectation. Further, there is an orchestrated feeling that, with the Greek Parliament passing an austerity budget, the crisis has passed. Stock markets in the US and Europe have surged almost throughout the past week. Never mind that, in the National ISM PMI index release in the US, inventories have surged past new orders, signalling weak demand. Never mind that, inexplicably, the Treasury Secretary wants to quit in the US when his star has been rising. Some things simply do not add up. The rally in stock markets in the US and in Europe smacks of another desperate throw of dice like that of the IEA oil release.

This post originally appeared at The Gold Standard and is reproduced here with permission.

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Emre Deliveli The Kapali Carsi

Emre Deliveli is a freelance consultant, part-time lecturer in economics and columnist. Previously, Emre worked as economist for Citi Istanbul, covering Turkey and the Balkans. He was previously Director of Economic Studies at the Economic Policy Research Foundation of Turkey in Ankara and has has also worked at the World Bank, OECD, McKinsey and the Central Bank of Turkey. Emre holds a B.A., summa cum laude, from Yale University and undertook his PhD studies at Harvard University, in Economics.

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