Just embrace it, amigo’s
It’s easier that way.
The Musk-ian tragicomic reality you presently occupy requires the most amusing and/or surreal outcome to be the most probable …. or, at the least, occur at a regular enough frequency to make it a plausible expectation.
But despair not! It’s not like the data has been ambiguous to the point of carrying negative utility or anything.
I mean, imagine if pre-FOMC was characterized by … oh, I don’t know, .. say an acute slide in the labor data, a cratering in all manner of domestic cyclical indicators, a conspicuously red-flag Beige Book report and a -800K revision to payrolls.
And then, immediately post-FOMC, somehow, say … Retail Sales accelerated (again), Industrial Production logged the strongest sequential gain in 7 months, revised GDP data made savings ‘excess’ again while completely reversing a raft of other meaningful conclusions derived from the original data … and ISM Services spiked to a fresh cycle high.
That would be crazy right!
Anyway, let’s play a game.
The first chart below is unlabeled.
Your task is:
- guess the two series that are plotted.
- Interpretate it (internally)
Answer:
- Black Line = ISM Mfg, Gray Line = Industrial Production
- We’ve profiled this recurrently but, again, the ISM Mfg and Fed Regional Mfg Survey data have effectively been mired in relentless contraction. The dislocation that opened up in the peri-pandemic period has persisted, leaving the historical relationship between the Survey series and the data it’s meant to serve as a proxy for broken.
The ISM and similar survey data have serially understated the official industrial-mfg activity (the yellow box annotation in the chart) while the domestic manufacturing economy as a share of national profits has shrunken to the point of conditional relevance (particularly when the largest companies and largest parts of the economy are reporting flat-to-accelerating growth).
In other words, the monthly Survey data are failing to accurate reflect (predict) activity in a sector of the economy that only kind of matters.
Without any preconceptions or attachments to the history/pedigree of that series, how much weight would you attach to it? (rhetorical)
To be clear, I’m purposefully overstating the lack of utility to emphasize the point. I think you get it.
With respect to this morning’s data ….
Everyone’s favorite bifurcated economy remained on full display with both the ISM and S&P PMI sending the same message of solidity across Services.
- Headline = +3.4 pots to 54.9 = 3rd month of expansion and highest in 20-months
- New Orders = +6.4 pts to 59.4 = also a 20-month high
- Employment = -2.1 pts to 48.1 = back in contraction after 2-months of expansion and the lone sore spot across the subseries
- Prices = +2.1pts to 59.4 = 3rd month of acceleration and highest in 9-months. Also corroborating the 1Y high in Prices in the S&P Services PMI.
As a reminder, we put the data above and the entirety of the domestic macro mosaic in exhaustive context yesterday in our 4Q24 Macro Themes presentation.
I highly encourage you to listen to that if you haven’t had the opportunity. Let us know if you need the replay details.
