Not just where they are, where they seem to be going

There is no way these PMI numbers are terrible. In the vacuum of the mainstream economy ceteris paribus Fantasy, these could all be slightly pleasant. However, there is no such thing and regardless of where they are now they are approaching comparisons that could be worrying, some have been. Therefore, the focus should be on the direction and trend provided by the behavior of the US (and world) economy in the same way we have seen it four times (since 2007).

Start with the ISM, the forefather of the group. The Institute for Supply Management reported a headline reading of 57.6 for the month of January 2022. That was 1.2 points down from December 2021’s 58.8, although the mid-to-high fifties don’t seem to be a big issue. Finally, the economy had to slow down from its frenetic pace at the start of 2021.

Still, 57.6 puts the top index in a boat with October 2018’s 57.5 – hardly a good comparison (or November 2014 if you want to go further back in time a euro cycle). And like three years ago, the trend was fairly established and no underlying month-to-month statistical noise; the peak had already been reached last March.

As we track inventory history, the ISM for new orders has fallen to 57.9 in the last month from 61.0 in the previous month. Again, not a terrible number, but the scale of the decline coupled with the continued persistence. This marks January’s lowest reported number of survey takers reporting more orders since June 2020.

Even the Prices Paid component, which rebounded from December’s plunge, rallied relatively little (even as oil prices rose).

The flood of data from the ISM is also the best of them.

IHS Markit had previously released its flash manufacturing sentiment indicator, revising it to 55.5 from a previous 55.0 on Tuesday. That level, like the ISM, corresponds to October 2018, with Markit claiming its new orders sub-index fell to the lowest level since September 2020.

The Federal Reserve’s regional manufacturing surveys suggest that this sector of the economy could be doing a bit worse. According to last month’s data, all regions — particularly new orders — saw the usual mixed bag noise across regions.

As mentioned, the Empire Survey collapsed last month while Philly’s recovered a small amount in January from December. Dallas held steady, KC fell a full eight while Richmond’s new orders fell a few points below zero (-6).

Overall, the average here fell from 17.12 in December to just 8.18 in January. Once again, as with the others, this is the same as December 2018 (or November 2014) – and like those earlier times, the direction seems pretty much set from here.

Again, none of these numbers are miserable. What they might be suggesting about the next phase of the economy should raise suspicions. At the very least (or maybe best) it’s a significant slowdown. Combine that probability with what we’ve seen so far as inventory building in the fourth quarter of last year, and how this has played out over and over again, and it’s not at all unreasonable to suspect anything more serious than a slowdown.

Therefore, coupled with the questionable recent jobs data and the determination of long-term yields given the ultra-hawkish policy combined with the imminent end of quantitative easing, the Fed is buying LT USTs (as we’ve been told time and time again). , believed to be the reason interest rates have stayed so low), there is a good deal of hard evidence as to why there is (along with history) so much skepticism about the reasons behind the FOMC’s change in policy.

Not so for economists working at a Wall Street firm, as Mr. Tateo pointed out. A few days ago they increased their fear of inflation, the Fed love forecast seven interest rate hikes this year.

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Publisher’s Note: The summary bullet points for this article were selected by Seeking Alpha editors.