Commodities fall, US economy "unambiguously recessionary"

Commodities fell again yesterday but stocks recovered the previous day's losses on Wall Street. Reuters reports:

Gold and oil fell sharply on Thursday as investors dumped commodities and lifted U.S. stocks to big gains on the view that inflation could moderate if the selling pressure in futures markets continues.

The dollar jumped to a week-high against the euro as investors fleeing commodities repatriated their cash into the beleaguered U.S. currency. A sagging dollar this year has given a major lift to commodities denominated in the U.S. currency.

Treasury debt prices mostly slipped but the shortest-dated government instruments rallied again amid a powerful safe-haven bid on the exodus out of commodities.

That safety should have taken priority perhaps isn't surprising after yesterday's weak US economic data. From Bloomberg:

The Conference Board's leading-indicator measure declined 0.3 percent in February, the fifth straight drop, the New York- based research group said today. The last two times the index dropped for as many months correlated with a shrinking economy. Meanwhile, the Philadelphia Federal Reserve said its factory index was at minus 17.4 in March, compared with minus 24 the previous month...

Separately, the Labor Department said the number of Americans filing first-time claims for unemployment insurance rose 22,000 in the week ended March 15, more than economists anticipated. The number of people on benefit rolls reached the highest since August 2004.

And Reuters reports another pessimistic signal.

[The Economic Cycle Research Institute's] Weekly Leading Index fell to 130.8 in the week of March 14 from 132.1 in the prior week, revised down from 132.2.

"It is exhibiting a pronounced, pervasive and persistent decline that is unambiguously recessionary," said Lakshman Achuthan, managing director at ECRI.

The OECD appears less certain of a US recession. From Bloomberg:

The U.S. economy will fail to grow for the first time in more than six years in the second quarter, the Organization for Economic Cooperation and Development said.

The stagnation will follow an expansion of 0.1 percent in the current period from the last three months of 2007, the Paris-based agency forecast today. That last time the U.S. economy failed to expand was in the third quarter of 2001.

"The U.S. economy is now essentially moving sideways, if not contracting outright," Jorgen Elmeskov, acting head of the OECD's economics department, said in a note today. "It may be premature to declare a recession, but with the pace of activity so far below potential, economic slack is widening rapidly."

Growth in Europe is expected to slow too.

Expansion in the 15-nation euro region should be 0.5 percent in the first quarter, spurred by exports and industrial production, before slowing to 0.4 percent in the April-to-June period, the OECD forecast...

Growth in Europe's service and manufacturing industries slowed more than economists forecast this month, according to a preliminary estimate of Royal Bank of Scotland Group Plc's composite index today. The gauge fell to 51.9 in March from 52.8 in February. Economists expected a decline to 52.4, according to the median of 14 forecasts in a Bloomberg News survey.