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7 days of Economics: a calm revival in the US

  • Alexandra Estiot Economist
  • Paris
  • 19.05.2017
  • In the US manufacturing output jumped in April
  • Still the recovery remains unimpressive
  • Will low oil prices support or slow the revival?

The rebound in the US manufacturing sector was confirmed in April with a monthly jump of 1%. Still, on a 3-month annualised basis, the performance is quite unimpressive (at +2.7% in April), especially when compared with sentiment indicators. The manufacturing ISM index was indeed as high as 57 points on average during the first quarter of this year. If the hard data area bit disappointing when read through what soft data were announcing, prospects are also softening. In April,the ISM index was down 2.4 points (at 54.8), a decrease led by the components for new orders (down 7 points to 58.6) and employment (down 6.9 points to 52.0). 

The deterioration of the manufacturing sector was confirmed this week by the New York Fed index for May. Once recalculated to make the comparison with the ISM clearer, that index wasdown 1.5 points and back below the 50-mark that separates contraction from expansion. News from the Philadelphia Fed was more upbeat (with an ISM-like index stable above 57), though. The renewed depreciation of the dollar is welcome, even more so that labour productivity has been slowing and unit labour costs accelerating despite the absence of wage inflation. As for low oil prices, the recent past taught us to be cautious in considering them as a net positive…

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