From Today's Numbers, A Recovery Is Hard to See

Another day of economic data that doesn’t spell raging recovery.

Industrial Production

Capacity utilization increased slightly from 68.1% in June to 68.5% in July. Industrial production was up 0.5% which is the first increase in that number since December 2007. Manufacturing production was up 1% but that was almost entirely due to auto companies ramping up production after their summer shutdown which was exacerbated by the bankruptcies of GM and Chrysler. Taking autos outo fo the equation, manufacturing was up 0.2%.

Overall, the economy still has enormous excess capacity. Their is nothing in these numbers to suggest that new investment will be needed for a prolonged period of time, which is just one more anchor to drag around. (more: here)

CPI

Consumer prices were flat. They rose 0.1% in July. Given the employment picture and the low utilization of productive assets, any inflation scenarios have to be considered fanciful. This gives the government a lot of leeway to continue pumping out money with little fear of igniting the inflation fuse. (more: here)

Consumer Confidence

Consumer confidence is a number that bounces around a lot and I tend to not take too seriously given its propensity to reverse course. Nevertheless, given the expectation for it to rise this when it actually fell from 66.0 in July to 63.2 this month, it probably deserves to be noted.

Linking it to the dismal retail sales report yesterday, reinforces the argument that the consumer isn’t remotely prepared to lead the economy out of the doldrums. They are scared to death, broke or think they might be soon and aren’t at all ready to come out of their cave. (more: here)

The numbers today don’t point to any incipient disaster but they certainly don’t show any strength that we can expect to build upon. We might well get a recovery of sorts in the third quarter simply because the economy won’t continue to shrink indefinitely. The problem is that there don’t appear to be any fundamentals on which to base long-term robust recovery.

Comments

[Dave Wrixon:]

To anyone but a fool a sustained recovery in the short-term ( and by that I mean a decade) has been impossible ever since Bear Sterns went down. Everything else has simply been a waste of valuable resources papering over the cracks.

Aug 14 04:25 PM

[Poor Texan:]

Meanwhile, the summer drags on. Restless youth waiting for school to begin and no jobs for spending money. Young people out of work, starting to get desperate for self-esteem and listening to the siren call of illicit activities. The unemployment problem must be addressed quickly or the threads of civilization will unravel. Infrastructure projects alone won't do it. Without private investment, which is discouraged by high employment taxes, why should an entrepreneur go beyond family and close friends for help in their business. "The numbers don't point to any incipient disaster."? Look beyond the numbers.

Aug 14 09:19 PM

[Schweizer:]

Economic numbers tend to improve slightly in a bounce, and chants of "the worst is behind us" may be soothing but are rather irresponsible as this statement is not knowable.

Nothing really have been solved. All that has happened is that the Treasury borrowed $700B to keep banks from failing. This money was created out of thin air by the FED, and can hardly be considered brilliant or "heroic."

Another $1T was borrowed by Obama, not to be stimulative, but to have the cash to retain government workers since tax revenues have fallen off a cliff. What a mega-waste.

Here is a graphic that sums up where we likely are at:
i32.tinypic.com/ehk65d...

Bear markets and recessions exist to clean out the excesses in the society. Very little of that has happened, especially at the Wall Street and Government levels. That is still ahead of us all, sadly.

Aug 15 06:14 AM

[MarvinMBA:]

We need some new stimulus to get us out of this downdraft...something that will get our industrial production and investments on the move again. Manufacturing, Jobs and Investments have moved overseas. We need to flood the country with immigrants that will get our domestic economy moving again...this happened in the early 1900's. Allow the Asian to come to this country unrestricted and you will see things start moving...Marvin MBA

Aug 15 11:55 AM

[ebworthen:]

Wow, there's a misconception.

We've taken the people already here and put them on WIC, Welfare, and in state jobs holding shovels.

We give illegal immigrants free healthcare and schooling in exchange for paying them dirt wages and treating them like slaves. This is so the pigs at the top of the gravy food chain have cheap housecleaning and kiitchen staff.

Meanwhile, the costs are passed on to the shrinking middle class that is expected to pay for everyone else as their jobs are shipped overseas and they are laid off so companies can turn a quarterly profit.

We've jacked healthcare, insurance, and taxes up to support the underclasses and the upper class. This is the real house of cards we have created and it won't be pretty when it comes crashing down.


On Aug 15 11:55 AM MarvinMBA wrote:

> We need some new stimulus to get us out of this downdraft...something
> that will get our industrial production and investments on the move
> again. Manufacturing, Jobs and Investments have moved overseas. We
> need to flood the country with immigrants that will get our domestic
> economy moving again...this happened in the early 1900's. Allow the
> Asian to come to this country unrestricted and you will see things
> start moving...Marvin MBA

Aug 15 03:59 PM

[MaxWeber:]

From a macro view of the US economy, it seems that we are in an oligopolistic environment in each of the dysfunctional markets. Whereas monopoly driven inelasticity plagued markets in the early 1900s, we are seeing more of a plutocratic oligopolistic inelasticity across multiple markets today. The difference today is that market inelasticity is caused by cooperative gaming by industry oligopolies, rather than monopolistic trusts. The results are sudden destabilizing cyclical inelastic effects on prices. Fuel and commodity price spikes followed by plummeting prices, inflated mortgage and related stock market bubbles, the health insurance bubble (and coming collapse - politically induced of course) - these artificial volitilies are the fallout of oligopolistic market gaming strategies. The end result could be irreparably broken markets. The idea that irrational behavior has gripped the market is a direct result of the breaking down of the rational relationship between supply, demand and price. If all of our broken markets were truly competitive these markets would be constantly self correcting, and gaming behaviors such as those which collapsed Lehman, AIG and BearStearns would be impossible. The fundamentals of the global economy (consumer growth, technological progress, market maturation) would, under a common sense interpretation, indicate a steady pace of reasonable growth (2-4%). But once one introduces the volatizing effects of oligopolistic market gaming, prices become distorted in short (1-5 year) bursts and the end result is pinball machine type action in valuations across markets. The market becomes impossible for the majority of players to engage in market stabilizing competitive behaviors, because they are wasting their energy trying to respond to oligopolistic price pressure. We don't have trusts to bust any more, we have de facto cartels... Until oligopolistic artificial price inelasticities are dealt with through rigorous policing of anti-competitive behaviors across all markets, we will continue to see these types of ongoing "Alice in Wonderland" markets. This is not the mainstream view, I understand. Anyone else have thoughts on this?

Aug 15 07:45 PM

[Supersuperman:]

right on on the lack of fundamentals. Also the next housing market crash is coming soon; www.wealthalchemist.co.../

Aug 15 08:49 PM

[LKofEnglish:]

so far as i noticed only person on the entire SA site predicted recovery this spring as an author and that was calafia beach pundit. turns out he's right for the upteenth time--a gutsy call by the way given the political situation--and yet no one can say a good thing. tell ya right now there is a recovery well underway it's just very "unfair" because it's primarily occurring in unpopulated rural areas that none of the "smartest people in the room" that populate this crazy train of thought live in. oh, well. there's saying that created many an american billionaire: dumb farmer big potato. as for all you genius' running around talking about how smart you are in being simply pessimistic be honest--would you do some market timing purchases in here now that you've admitted you've missed this whole rise of the past 5 months?

Aug 15 11:02 PM

[phubaiguy:]

This rally is not based on fundamentals, it based I think just on this is what happens at this point. They say the big money is not in yet and perhaps that's because what supposed to happen next is a huge fall. We'll see but why worry if you punch out quick and even less of you hit reverse? I see opportunity now either way unless you just sit and wait.

Aug 15 11:08 PM

[been there:]

economy or stock market; stock market can be manipulated economy can not. small business employs 80% of the people. what is outlook for small business, higher taxes,more regulations,higher health care costs, less profits, less total market place due to continuing high unemployment. Outlook bad very bad.

Aug 16 09:55 AM

[hep:]

Asians....what about the mexicans that the us government is spending a fotune on trying to keep out. Let em all in, they just want to work, buy stuff at our stores, buy houses, cars etc. The problem with our system is overcapacity resulting in falling prices. The only way to soak up this overcapacity is to increase demand, i.e. more people to buy things. Whoever wants to come into the county and work, should be let in.


On Aug 15 11:55 AM MarvinMBA wrote:

> We need some new stimulus to get us out of this downdraft...something
> that will get our industrial production and investments on the move
> again. Manufacturing, Jobs and Investments have moved overseas. We
> need to flood the country with immigrants that will get our domestic
> economy moving again...this happened in the early 1900's. Allow the
> Asian to come to this country unrestricted and you will see things
> start moving...Marvin MBA

Aug 16 02:43 PM

[mikebrah:]

Well minimum wage needs to be eradicated before that can happen. The labor market is already over-supplied at $7-10/hour, so how would flooding the country with even more people looking for low-income work solve anything?

MM


On Aug 16 02:43 PM hep wrote:

> Asians....what about the mexicans that the us government is spending
> a fotune on trying to keep out. Let em all in, they just want to
> work, buy stuff at our stores, buy houses, cars etc. The problem
> with our system is overcapacity resulting in falling prices. The
> only way to soak up this overcapacity is to increase demand, i.e.
> more people to buy things. Whoever wants to come into the county
> and work, should be let in.

Aug 17 12:12 AM