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.