So it's back to school - la rentree - for the international financial markets after the 'thin trading' season, and it's hard to see much cause for optimism. Japan is having great difficulty sustaining momentum, Euroland is getting into deeper and deeper water, and the latest bout of economic data from the US is hardly encouraging.
U.S. manufacturing barely grew in August after a sharp setback a month earlier, a report said on Tuesday, stoking worries the economy's already weak recovery may stagnate more in coming months. The Institute for Supply Management (ISM) said its closely watched index of factory business conditions was unchanged in August at 50.5, posting a seventh month of growth but coming in below expectations for a rise to 51.6. Any reading above 50 signals growth, while one below 50 indicates contraction in a sector that makes up roughly one-sixth of the U.S. economy. In what ISM said was a cause for concern for manufacturers the rest of the year, the new orders index fell in August to 49.7 after having tumbled more than 10 points in July to 50.4. That showed new orders, a key source of future growth, declining for the first time since last November.
Source: Yahoo News
Wall street took the news badly and continued the downward trend that started at the end of last week. Of course the stock markets may be just as influenced by the continuing war talk about Iraq or the ongoing probes into entities like Citicorp, so its impossible to read to much into this. But the continuing attrition in the job market, and the stop-go expansion in manufacturing leads me, like Steven Roach, to keep asking how long the American consumer will carry on the weightlifting exercise. Certainly it's far from clear how any of this is going to move forward in the short term, but my own personal feeling is that in the absence of any real expansion push the dangers of falling back into recession are as present as they ever were.