So, my thesis of a US mini-cycle culminating in slowing growth is firming up. Last night we had a raft of important data that showed the current bounce is on thin ice. First up was the ISM manufacturing index slowed 2.1 points to 52.4 in February in defiance of regional indexes:
The slowing is visible across the board with the exception of new export orders, which rose handsomely. However, this was offset by slowing local new orders. Note too the accumulation of inventories that drove the bounce is finished:
The second big release of the night helps explain this pattern. The Personal Income and Outlays report for January showed a plateauing of US household income growth that must be haunting the sleep of one Ben Bernanke:
Personal income increased $37.4 billion, or 0.3 percent, and disposable personal income (DPI) increased $14.1 billion, or 0.1 percent, in January, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $23.2 billion, or 0.2 percent. In December, personal income increased $60.2 billion, or 0.5 percent, DPI increased $48.3 billion, or 0.4 percent, and PCE increased $3.2 billion, or less than 0.1 percent, based on revised estimates.
The important figure is the 0.3%. Times that by 12 and you get 3.6%. With inflation running at around 3%, that means real spending ain’t going anywhere in a hurry, which is nicely illustrated in the following chart from Calculated Risk:
That’s what I call a stall.
Now, consumers could still do what they did late last year and run down savings but there was no evidence of that in the report:
Personal saving — DPI less personal outlays — was $540.6 billion in January, compared with $552.1 billion in December. The personal saving rate — personal saving as a percentage of disposable income — was 4.6 percent in January, compared with 4.7 percent in December.
The weekly DOL reported a slight decline in unemployment benefits for the week, down 2,000 to 351,000, but if the current pattern in income growth persists, employment growth is going to stall as well.
