Economic Growth, Starting piking up or Recession on the early stage?

Recently opposite two opinions are running on their own tracks further. So, the median, or market prices have moved in the small range with low volatility.

Ahead of possible Fed's fund rate hike in December, one argues we should prepare the start of economic recession, while another one says rate hike could spur sentiments for economic activities.

But, some indicators about industrial output which had tumbled since the start of this year in both of United States and emerging countries especially with China start to show somewhat positive signals. Below chart is from Barclays Capital, and J.P.Morgan commented global industrial production especially in Asia seemed to bottom up. It appears the slowdown cycle of manufacturing sector ended and starts new cycle to upward even if it's very short lived. Fed's fund rate hike could boost economic activities as it will diminish the uncertainty about the timing of starting to monetary tighten at least. Especially in emerging markets which had tended very vulnerable as USD started appreciation, as worries about China decrease, it will never be negative issue once again.

Yesterday, U.S. ISM manufacturing index declined to 50.1 a little bit higher than neutral level, contrary to surprised Chicago manufacturing PMI last week. Many argue U.S. manufacturers have been suffered since early this year especially with strong dollar, so this could lead the economic recession next year. In fact, declined 3rd quarter's GDP in U.S. was affected by the burden of excessive inventories. Moreover, considering employment index has been pushed lower in ISM, even though manufacturers start to think industrial economy could gain from now, it will be not sufficient for increasing their labor cost.

However, the weight of manufacturing jobs is somewhat small in U.S. This maybe not affect NFP releasing late this week. If the NFP data is very disappointed, more people start considering full employment condition as weekly initial jobless claims remain low since 1970s.

But the conviction about my view is not so strong. It's very difficult to forecast for now really.

Nevertheless, the possibility of gaining industrial output is higher than before apparently. This change could change the financial market prices as an inflection point. It's because many market participants seem to bet on deflation scenario.

By the end of this year, we should be cautious the bond bear market. Euro area? They should not be free from it while the pace could be slower than U.S. or U.K.