US Holding Up Better than Europe

The US manufacturing ISM held up better than expected and better than the euro zone. The US ISM slipped to 59.7 from 60.4. Orders were steady at the lofty 65.7 while production slipped slightly (66.6 from 66.9). Employment rose to 59.8 from 58.5 and this will likely encourage some economists to revise higher forecasts for the employment data due at the end of the week.

The euro zone PMI fell to 55.8 from 57.6.

Construction spending jumped 2.7% in April, the biggest rise in a decade. This time series, like other housing sector reports, have been flattered by tax incentives that are winding down. Residential outlays rose 4.5% on the month and nonresidential rose 2%. Public works outlays rose 2.4%.

The better than expected US economic data has encouraged some appetite for risk and the US equity market has recovered initial losses and the dollar has seen its earlier gains against most of the major currencies pared.

Recall that the Fed's Lacker suggested recently that his preliminary guesstimate is that the euro zone crisis may shave 0.1%-0.2% off Us GDP this year. In dollar terms this is roughly $140-$280 bln. And the new stimulus that some Administration advisors are pushing for is worth around $200 bln.