The performance of the U.S. stock market is quite impressive considering that there isn’t much of a spring in the latest batch of economic indicators. The winter’s ice patch is looking more and more like the spring’s soft patch -- all the more reason to expect either one-and-done or none-and-done from the Federal Reserve. Consider the following:
(1) Business surveys. Three of the six regional business surveys that I track are available through April. The averages of their composite indexes tend to be highly correlated with the national manufacturing purchasing managers indexes. The average for the Federal Reserve Bank districts of Kansas City, New York and Philadelphia fell to -0.2 this month from 2.6 last month and a recent peak of 18.8 during November of last year. It’s the lowest since May 2013.
The average of the three new orders indexes was -5.8 this month, about the same as last month’s -6.2, which was the lowest since October 2012. The employment index fell to 1, the lowest since November 2013.
(2) Flash M-PMI. The national flash manufacturing purchasing managers index compiled by Markit fell to 54.2 this month, from 55.7 in March. The Institute of Supply Management’s M-PMI was much weaker than Markit’s reading in March. The same is likely this month given the weakness of the available regional surveys so far.
(3) Durable goods orders. The weakness in the regional orders indexes was confirmed by the April 24 release of March durable goods orders. While the overall number rose 4% month-over-month, boosted by a surge in aircraft orders, non-defense capital goods orders excluding aircraft fell for the seventh consecutive month through March, by a total of 6.7%. Orders have been especially weak for primary metals, fabricated metal products, machinery, electrical equipment, appliances and components. That probably reflects the combined depressing impact of lower oil prices on the energy industry and the higher dollar on exports.
(4) Lumber prices. In recent days, I’ve noted the plunge in lumber prices since the beginning of the year through April 22. That’s not a good omen for housing starts or the S&P 500 Homebuilding index. Neither is the flat trend in railcar loadings of lumber and wood products over the past year. New home sales fell 11.4% month-over-month during March.
Source: Ed Yardeni — Ed Yardeni is the president and chief investment strategist of Yardeni Research Inc., a provider of independent investment strategy and economics research for institutional investors.
