U.S. manufacturing data . . . with context
Macro Perspectives
There was a lot of attention given to yesterday's U.S. manufacturing data, specifically the inflation component.
We know price pressures bounced back in January - this was the first clue on February inflation.
Prices were higher.
New orders were higher.
But the manufacturing index itself remains in contraction territory.
This had people chattering about stagflation (hot inflation, slow or no growth) and recession. But let's take a look at the price data from the report with some context . . .
Price pressures in this manufacturing report are bouncing, but from low levels compared to this time last year.
On the note of recession risk: we had a recession - it was last year. The two consecutive quarters of negative GDP growth in the first half of last year, were indeed driven by the very catalyst that many are ascribing an impending recession to: a Fed tightening cycle.
The recession is not looming, it already happened.
At this point, they've already normalized interest rates, inflation has cooled, inflation expectations are tame, and the economy is on pace to put up another (consecutive) growth quarter in the 2.5% area.
Additionally we have the growth catalyst of China coming in, after they finally scrapped zero covid policies. The composite PMI out of China for the month of February, which measures economic activity in the manufacturing and services sector, was strong, well into expansionary territory, and above pre-covid levels.
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