The Great Decoupling Myth

Recently U.S. data has taken a more positive tone as international data continues to get softer. Thursday’s U.S. data brought a very strong number on jobless claims, along with two regional manufacturing surveys that were better than expected. Industrial production numbers were weak, but on balance more data beat estimates than missed, and that’s been the pattern for the last few months. Meanwhile Europe continues to deteriorate and the numerical trends are worrisome. At this point it would seem a European recession is a foregone conclusion, and the only question left to argue about is whether the recession will be mild, average or severe. In Asia things are cooling fast as well, and many leading indices are falling. The positive spin is that the emerging world is now cutting rates; on the other hand, they are not cutting them fast enough, nor with sufficient magnitude. Overall the international data is far weaker than that of the U.S., which makes for a mixed and confusing landscape.