MLR - PMP 3/2/15
Major averages fell Friday on higher volume. A brief pause is not surprising after the majors have been moving higher over the last few weeks, with the NASDAQ Composite up 10 days in a row.
The February reading of Chicago PMI tumbled to a five-and-a-half year low of 45.8, down from 59.4 in January and below the 50 mark measuring contraction. This came on the heels of double-digit drops in production, new orders, order backlogs and employments. That said, some reports came in roughly in line with expectations including fourth-quarter GDP and University of Michigan's consumer survey, and home sales came in ahead of expectations.
The question still remains as to the accuracy behind these figures, especially when it comes to unemployment which has been cited to be far higher than what is reported since the many who have given up looking for work are then excluded from the unemployment figure. The Federal Reserve is likely to keep rates at record low levels for longer than expected since Yellen is dovish so will continue to set policy according to economic data.
As for the global economy which has been stuck in the mud, one of our close contacts is a professor at China's Dongbei University of Finance and Economics in Dalian, China. He wrote today:
"Chinese government numbers are definitely not to be trusted. This country is in a recession, never mind their supposed 7.5% growth numbers. I see the recession every day in the Development Zone. It’s real, and it’s here. When I ride my bike 10 miles up the bike trail near where I live, I pass perhaps 20 huge factories and headquarters. Of those 20, not more than 5 are actually functioning. The rest are empty and rotting. According to a local taxi driver, 200,000 people have left the Development Zone in the past three years. The Japanese companies are folding up and going home, and the Chinese companies are shrinking."
Indeed, the global economy remains unwell.
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