Goodmorning from Europe

The shift in trends between Manufacturing and Services keeps catching our attention. Yesterday, the Richmond Fed Manufacturing jumped from -7 to 5, once again emphasizing that there’s a decent chance of a continued restocking trend in US Manufacturing.

Meanwhile, both Dallas Fed and Philly Fed services gauges dropped deeply into negative territory. Manufacturing is now the part of the economy with momentum (from weak levels), while Services see declining momentum across the board.

This is obviously bad news for the broader economy, but there are some pockets of strength to investigate still.

Chart 1: Our regional PMI model points to >50 ISM Manufacturing