No Recession Yet, says ISI Group’s Sloterbeck
Yesterday’s release of the ISM services report was the latest datapoint to provide bears with ammunition, but a comparable survey run by ISI Group is not in recession territory yet.
Is it just a matter of time before Oscar Sloterbeck’s numbers confirm the ISM survey?
Not so fast, says ISI Group. The New York brokerage firm has its own service sector index that it puts together from weekly surveys it conducts of auto dealers, homebuilders, shopping guides, credit card companies, airlines, banks, restaurants, wine & spirit wholesalers, temp employment companies, trucking companies, shipping companies and commercial real-estate companies. While it has been trending down, it didn’t show the abrupt plunge in January that the ISM’s index did: the four week average has slipped to 46.5 in early February from 47.1 at the end of January and 48.5 at the end of December.
“We think the risk of recession is high, but the data in aggregate are not consistent with a US recession right now,” says economist Oscar Sloterbeck, who runs the surveys at ISI. Unemployment insurance claims aren’t high enough, the manufacturing ISM index is at 51 instead of recession levels of 41, the firm’s own diffusion index is still above recession territory and “the Company Surveys in aggregate aren’t low enough.” Real Time Econonomics
The survey’s might indicate that further deterioration is inevitable, and Oscar’s work will likely confirm what the ISM number is already signaling. Still, until it does, the optimists might enjoy a few more weeks of denial. Conspiracy theorists are still pointing toward the early release if the ISM as fishy, and the bond market has certainly been roiled. Trading has been manic. What gives?
ISI Group publishes excellent research; the only downside to their work is that it is so influential it becomes consensus thinking on the Street. Was yesterday’s selloff exacerbated because the big money crowd were relying too heavily on Sloterbeck’s previous surveys, and were caught flatfooted? Or is the ISM number wrong?
The prohibitive cost of ISI Group’s excellent work puts it beyond the reach of even many institutional investors; but Real Time Economics is the next best thing. The blogs at the Wall Street Journal seem to be getting more traction and mindshare than those on CNBC, another reason we believe Murdoch will end up on top in the unfolding media battle. Hopefully Murdoch realizes that Greg Ip is one of his MVP’s.
Service-Sector Disconnect
Real Time Economics
UPDATE
Treasuries briefly pared losses after the Institute for Supply Management denied speculation that the group would revise its latest report, which showed service industries contracted the most since 2001, Ian Lyngen, a strategist at RBS Greenwich Capital in Greenwich, Connecticut, said in a note today.
The ISM’s non-manufacturing index, which reflects almost 90 percent of the economy, fell to 41.9, the lowest since October 2001, the last time the U.S. was in a recession, from 54.4 the prior month, the Tempe, Arizona-based ISM said Feb. 5.
There was no error in the original report and no revision is planned, ISM spokeswoman Andrea Wass said in an e-mail to Bloomberg News.
30-Year Treasuries Fall Most Since 2004 After $9 Billion Sale
Bloomberg
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