[We] received the Chicago National Activity Index for March. a proxy for GDP. It ratified the message from so many other pieces of data that economic momentum stalled out as the first quarter drew to a close. The 'spot' index swung from an already soft +0.07 reading in February to a recession-like -0.29 headline in March. marking the third consecutive decline and the fourth drop in the past five months. This is what makes the Fed's more sanguine view of the economic outlook so bizarre` The economy is only "getting better" if we want to benchmark today to the lowest point in the Great Recession. Other than that, this three year old recovery is looking pretty fragile. This is the first time that the Chicago index has been in negative terrain since last November (when the global economy needed an LTRO jolt) and the lowest i1 has been since last August (when the stock market was in a full-fledged corrective phase).
Looking at the various components, the employment sub-index sagged from 0.37 in January to 0.16m February to a five-month low of 0.09 in March - adding some validity to the soft BLS (Bureau of Labor Statistics) jobs data that were released for the month. Production swung from +0.12 to ~O.13. the third straight slowdown and the first move below the zero-line since last November. Incredibly, the personal consumption and housing category - oh, only three quarters of the economy - weakened from -0.24 in February to -0.28 in March which is not only the worst print since last October, but marks the 63rd consecutive month of sub-zero results. You read that right - we haven't had a positive number on this score since December 2006, which is unprecedented.
The Kansas City Fed Manufacturing Activity index also came in below consensus estimates at 3 in April (the consensus was 7) and has declined now for two months in a row. The production segment collapsed from 13 to 0. Volume orders also took a nosedive to -8 from 17 - lowest level since last May (and that proved to be the peak for the year regarding the S&P 500), The number of employees and supplier delivery times were unchanged. Volume of shipments went from 17 to 3; backlog of orders swung from 3 to -5 and the average employee work week slumped from 2 to -10. Talk about a tale of woe. The ‘future expectations' index also fell for the second month in a row - slipping from 18 to 12. Production plans were curbed from 31 to 26 - lowest level since December (and adding confirmation to the Philly Fed 'special question' on output growth throttling back in Q2). Hiring plans went from 23 in March to 15 in April. Capital expenditure plans tumbled to 6 from 20. now standing at the lowest level since October 2010.
I mean, real final sales (real GDP excluding inventories) at just a 1.6% annual rate in Q1. after just 1.1% growth to close out 2011. is a huge disappointment. To be seeing numbers this low in the context of all the monetary and fiscal stimulus that has been thrown at this recovery in recent years is disturbing and ratifies Ben Bernanke's lingering concerns over the fragility of the economy. This is why comparing 'fair value' P/E estimates to the past is a useless exercise. or debating over where bond yields ‘should’ be is a colossal waste of time. because the economic backdrop had such a small growth cushion against possible contractionary shocks at this stage of the business cycle.