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By New_Deal_democrat July 5, 2017 10:58 am
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Houses, cars, and manufacturing Oh My!

We got contrasting data showing weakness and strength on Monday, that on balance nudges my outlook slightly darker.

The two big consumer durables are houses and cars. In view of the last few months' slowdown in housing permits and starts, I have already - at least temporarily - downgraded my housing outlook to negative.

June's motor vehicle sales (red in the graph below), at an annualized rate of 16.4 million, were the lowest in 2 1/2 years:

Although it would take a number under 16.0 million for me to be concerned about any recession in the near future, it is enough for me to score vehicle sales as negative, along with housing permits (blue in the graph above).

If the two big consumer purchases are now negatives, on the producer side of the ledger manufacturing continues to get a positive boost, via June's strong ISM manufacturing number.  Here is the data, via Briefing.com, since the beginning of the Millennium:

The new orders reading was particularly impressive.

The ISM manufacturing data goes all the way back 70 years to the late 1940s.  Here it is in roughly 30 year increments since then:

With the sole exception of the Arab oil embargo of 1974, there has simply never been a recession without the ISM manufacturing reading falling below 50 (really below 48.5) first.  Since 1982, typically ISM manufacturing has been under 50 for at least 6 months before the onset of a recession.

Note that real retail sales per capita, which typically has turned negative about a year before the onset of any recession, is still trending slightly positive:

So, while there are reasons for some heightened concern about the state of consumer spending, there is no sign of any imminent downturn. Meanwhile the industrial production side of the economy continues to be positive.

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