I am amused by the Shadow Weekly Leading Index Project which claims the probability of recession is 31%. I think it is much higher.



When the NBER, the official arbiter of recessions finally backdates the recession, May or June of 2012 appear to be likely months. Let's take a look at why.



US Manufacturing PMI



Markit reports PMI signals weakest manufacturing expansion in 11 months



Key points:





PMI lowest since July 2011, suggesting slower rate of manufacturing expansion

Rate of output growth broadly unchanged

New orders rise at weakest pace in four months

Input costs fall for first time in three years

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The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, fell from a reading of ‐5.8 in May to ‐16.6, its second consecutive negative reading. Nearly 40 percent of the firms reported declines in activity this month, exceeding the 22 percent that reported increases in activity.



Indexes for new orders and shipments also showed notable declines, falling 18 and 20 points, respectively. Indexes for current unfilled orders and delivery times both registered negative readings again this month, suggesting lower levels of unfilled orders and faster deliveries.



Firms’ responses suggest steady employment this month but shorter hours. The percentage of firms reporting higher employment (14 percent) edged out the percentage reporting lower employment (12 percent). The current employment index increased 3 points this month. Firms indicated fewer hours worked this month: the average workweek index decreased 14 points and posted its third consecutive negative reading.

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The Tax Foundation reports that because of higher federal income and corporate tax collections, Tax Freedom Day came four days later this year than last. And the bad news is that unless Washington takes action, it will take working Americans 11 more days to meet next year’s tax burden.



That’s all due to Taxmageddon — a slew of expiring tax cuts and new tax increases that will hit Americans on January 1, 2013, amounting to a $494 billion tax hike. Heritage’s Curtis Dubay reports that American households can expect to face an average tax increase of $3,800 and that 70 percent of Taxmageddon’s impact will fall directly on low-income and middle-income families, leaving them with $346 billion less to spend.

Without significant tax code changes, in 2013, America is scheduled to get hit with what would be the largest tax increase in our history.



Not only will the $1,000 per year tax holiday for a $50,000 income household disappear, come 2013 all Americans will see the tax on their first $8,700 of income jump from a 10% rate to 15% rate.



That hike will cost the majority of filers an additional $435.



For those eligible for child care tax credits that deduction will drop from $1,000 to $500. The marriage penalty will roar back into effect. The AMT, alternative minimum tax, will finally kick in.



Roll those changes up and a family filing as married with two children making $50,000, will see their taxes increase by basically $2,700.