Many data points have been cited as green shoots since they are simply "less bad". For example, if earnings continue to decline, but at a lower rate, this has been cited as a positive or green shoot. Well, one data point that is actually positive is the New Orders minus Inventories (NO-I) data point.Reproduced chart below (original from Argus Research)
Back to David's analysis (bold mine):
Ten industries saw new orders increase with five showing declines. The issue, and you (EconomPic) highlighted this in one of your recent posts,I'll agree that it does point to a possible surprise on the upside in Q3 GDP, but the question remains whether an inventory correction can lead to a prolonged recovery.
"Mother of All Inventory Corrections"
is the five declining issues are contracting at a larger rate than the 10 growing industries.
Generally, a new orders index number above 48.8 is consistent with an increase in manufacturing orders. The new orders index for June equaled 49.2 although down from 51.1 in May.
In short, I do think it is a pretty positive print. I would like to see the new orders index find some stability though. Lastly, we need to see jobs created and simply come in at a "less bad" number.
Source: ISM / BEA
from your "Mother of All Inventory Corrections" production and new order don't seem to have a 1Q lagging so the pick up in new order, i doubt, will translate into a meaningful raise in GDP output in Q3. Especially with extremely low utilization and working hours. If a new order came in instead of delay to the next quarter(like they would when they are running at high capacity), factories will probably go ahead and start producing. so in terms of GDP Q2and Q3 should not be too different, unless orders will keep going up.
ReplyDelete