The Western recession I’ve been awaiting for three months is arriving. Last night’s European flash PMI for September was a shocker, falling 1.5 points into contraction at 49.2. Here is a chart of the PMI and its relationship to GDP:
Moreover, here’s a chart of the core versus periphery nations:
Well there’s a surprise. Peripheral austerity leading core production lower. The release’s internals were not terribly encourgaing either:
Manufacturing and services both showed modest contractions, with manufacturing output falling for the second successive month (albeit at a slightly reduced rate) and service sector activity falling for the first time since August 2009. In both cases, the declines contrast markedly with strong rates of growth in early-2011.
Output growth slowed to near-stagnation in both Germany and France, showing the weakest rates of expansion since their recoveries began over two years ago. The rest of the Eurozone, meanwhile, contracted for the fourth successive month, with the rate of decline accelerating to the fastest since July 2009.
Manufacturing and services both showed modest contractions, with manufacturing output falling for the second successive month (albeit at a slightly reduced rate) and service sector activity falling for the first time since August 2009. In both cases, the declines contrast markedly with strong rates of growth in early-2011.
Output growth slowed to near-stagnation in both Germany and France, showing the weakest rates of expansion since their recoveries began over two years ago. The rest of the Eurozone, meanwhile, contracted for the fourth successive month, with the rate of decline accelerating to the fastest since July 2009.
So, the eurozone is sliding into recession largely on the heels of its marvelous austerity drive. Who’da thunk it? Who coulda known? Certainly not economists:
Not a single economist out of the 37 polled by Reuters predicted the euro zone services number would fall below the 50 level that divides growth from contraction. In the event, it fell from 51.5 last month to 49.1 in September – its lowest reading since July 2009.
This is bizarre given, as Delusional Economics has pointed out for months, that European M1 has been howling the recession risk. Forgive the sarcasm but it is days like today that one questions not just the sanity of economists but of the entire species.
Which brings us to the truly lunatic gong of the day. US Republican and Democratic Senate fruit cakes are threatening again to shut down the US government. From Reuters:
Republican leaders were scrambling on Thursday to find the votes to keep the government funded after the embarrassing defeat of a spending bill threw into question Congress’ ability to pass basic laws.
The House of Representatives and Senate must pass legislation to keep the government fully functioning beyond October 1 while lawmakers continue to debate a full budget. Democrats and Tea Party-aligned Republicans united to defeat the spending bill on Wednesday, albeit for opposite reasons.
House Speaker John Boehner, the top Republican in Congress, said the dispute would not disrupt government operations.
“We’ll work our way through this. I’ve always been confident that we’ll be able to come to an agreement and we will,” Boehner said at a news conference.
The Republican leadership has vowed to lower the temperature on Capitol Hill after fierce budget battles with Democrats pushed the U.S. government to the brink of a shutdown in April and the edge of default in August.
The months of turmoil on Capitol Hill have spooked consumers, rattled investors and led to a cut in the country’s top-notch AAA credit rating.
The unexpected failure of the spending bill in the House on Wednesday showed that Congress still has trouble passing normally routine legislation.
World stock markets tumbled as a grim outlook from the Federal Reserve renewed fears of a global recession. The turmoil in Washington could add to the uncertainty among nervous investors, traders said.
“There is such a lack of belief that we can expect any kind of help to come out of our political leaders,” said Mitch Stapley, chief fixed-income trader at Fifth Third Asset Management in Grand Rapids, Michigan.
The bill in question would provide billions of dollars in relief to communities that have been ravaged by tornadoes, floods and other disasters in one of the most extreme years for weather in U.S. history.
It also would keep the government running past the end of the month, buying some time for lawmakers to complete the appropriations bills that fund the government for the 2012 fiscal year that starts in little over a week.
Perhaps the dolphins can save us.
