A Banner Day for Bad News

03/22/2012 3:44 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

Global economies have heaped a load of negative economic indicators on the markets, so it's no wonder the response has been a worldwide decline, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

Today, it seems like the US is the only strong economy in the world.

This morning, US initial claims for unemployment fell to 348,000 for the week ended March 17, from 353,000 the prior week. Economists surveyed by Bloomberg had projected a drop to 350,000.

That number would be consistent with the US economy adding another net 200,000 jobs in March, for a fourth consecutive month of 200,000 new jobs or better. But if you're looking for good economic news today, that's about it.

The data out of Europe, for example, show that the region will slip into something deeper than the mild recession the European Central Bank projected back in January for the first two quarters of 2012.

And the bad news is pretty much all over Europe. In the United Kingdom, retail sales fell by 0.8% in February from January. (The expected decline was 0.4%.) Year-to-year sales were up 1%, versus an expected gain of 2.6%.

In Portugal, the government announced that its budget deficit almost tripled to $600 million in the first two months of the year. Higher tax rates put in place as part of the country's austerity package were offset by a 4.3% drop in government revenue as the economy slowed.

In Ireland, the Eurozone's austerity "success" story, the economy slipped back into recession, with a drop of 0.2% in first-quarter GDP. In the fourth quarter of 2011, revised figures show the economy contracted by 1.1%.

In Germany, the Markit Economics flash Purchasing Managers' Index for March showed a drop to 48.1 for manufacturing, from 50.2 in February. That's a four-month low. Remember anything above 50 shows a sector is expanding; below 50 and a sector is contracting.

Unlike manufacturing, services stayed above 50, at 51.8, but that was still a drop from 52.8 in February, and also a four-month low for the index.

For the European Union as a whole, the Purchasing Managers' Index dropped to 48.7 in March. That was down from 49.2 in February and a projected 49.2.

Not surprisingly, prices on Spanish bonds fell, pushing the yield on the country's ten-year bonds above 5.5% for the first time since January.

And I hope that you're not looking for good news from China today. The preliminary Purchasing Managers' Index survey by HSBC came in at 48.1 in March, down from a final survey reading of 49.6 in February.

The HSBC preliminary survey tends to be more bearish than the final survey, since it contains a higher proportion of smaller companies. Those companies have had a tough time raising capital recently, and I expect the final reading will be higher.

Still, the trend is pointing in the wrong direction. No one should be surprised that China's economy is slowing. The important question remains by how much.

Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Polypore International as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund's portfolio here.

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