If Monday's report on June manufacturing activity was a bit of a disappointment, prospects brightened some today with this, from Bloomberg:
Factory orders in the U.S. rose more than forecast in May and a private report showed unexpected strength in hiring, easing concern that the Federal Reserve's interest rate increases are slowing the economy too abruptly.
Orders placed with factories increased 0.7 percent during the month, led by demand for business equipment, following a 2 percent decline in April, the Commerce Department said today in Washington. A report from the largest paycheck processor, Automatic Data Processing Inc., showed U.S. employers added 368,000 jobs in June, the most since 2001...
ADP's report prompted speculation that a government payrolls report on July 7 will show stronger jobs growth than economists expect...
Orders for capital goods excluding aircraft, a proxy for future business investment, rose 0.5 percent after falling 2.1 percent in April. Companies placed more orders for machinery, metals, and communications equipment.
Of course, most commentary these days leads to the FOMC:
"The Fed has to see the economy as looking pretty healthy,'' Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, said in an interview. ``Really, it's keeping the Fed focused on the inflation numbers and less convinced about a sharp slowing in the economy.''
That isn't music to everyone's ears. From the Wall Street Journal (page A1 in the print edition):
The Wall Street Journal's latest survey of 56 forecasters, conducted in mid-June, suggests an economy at a crossroads, with growth looking set to slow but inflation accelerating. That makes the Fed's actions on short-term interest rates the biggest question mark in many economists' outlooks...
The consensus forecast of the 56 economists is that growth in real gross domestic product -- a broad measure of economic activity, adjusted for inflation -- will ease to an annualized 2.9% in the second half of 2006. That compares with an annualized 5.6% in the first quarter and an expected 2.8% in the second quarter, which would bring first-half growth to about 4.2%. By the first half of next year, growth would cool further to 2.7%, the slowest rate since mid-2003...
Forecasters offered a litany of potential threats, from a widespread outbreak of avian flu to a geopolitically motivated energy crisis. But the most prevalent concern was that the Fed, zealous to beat inflation under a new chairman working to earn inflation-fighting credentials, will take interest rates too high and tip the economy into recession. In the survey, 12 of the 56 participants named a monetary-policy mistake as the greatest risk looming over the economy in the next 12 months.
I don't think the FOMC is likely to adopt the motto "Monetary Policy: Worse That the Avian Flu" any time soon. Nor, according to the article, is the majority of its surveyed experts:
Still, for the most part, economists voiced a generally high opinion of Mr. Bernanke's ability to find the right balance. They gave the new Fed chairman a grade of "B-plus" for his interest-rate decisions so far, and 31 of the 56 polled said they expect the Fed to whip inflation with only a limited impact on growth. Just 14 said they think it will go too far and damage the economy.
That's a relief, but if things do turn out badly, don't say Barry Ritholtz failed to warn you.