I'm on a cruise ship somewhere between Capri and Messina, and the satellite internet speeds are so slow I'm reminded of the days when I used telephone modems. So I can't do much more than update some charts. They all show that nothing much has changed: the economy is still plodding along rather unimpressively, and the demand for the safety of money and its substitutes is declining slowly. Nothing scary and nothing very exciting. A good time to take a cruise!
The ISM May manufacturing index bounced a little, soothing the fears of those who worried the economy was slipping into a recession after a weaker-than-expected first quarter GDP report. As the chart above shows, the ISM index is consistent with GDP growth of at least 2% in the current quarter, and it wouldn't be surprising to see it come in a bit stronger than that.
The April employment subindex was a bit worrisome, but the May reading reinforced the notion that we have seen the worst of the weakness that affect a lot of things in the first quarter.
Both the U.S. and the Eurozone manufacturing indices point in the same direction: slow and unimpressive growth.
Gold prices are bouncing around their post-peak lows, and look to be drifting slowly lower. Real yields on TIPS—shown above in inverted fashion in order to proxy the behavior of TIPS prices—look like they are drifting slowly higher too (i.e., prices are drifting slowly lower). Both suggest that the world is less worried on the margin. This reflects a very gradual decline in the demand for money, and that, in turn, ratifies the Fed's intention to slowly raise interest rates from their zero bound.
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