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Steven Hansen
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Steven Hansen is an international business and industrial consultant specializing in turning around troubled business units; consults to governments to optimize process flows; and provides economic indicator analysis based on unadjusted data and process limitations.
My company:
Econintersect LLC
My blog:
Global Economic Intersect
  • Why Is Manufacturing So Soft? 1 comment
    Mar 8, 2014 7:53 AM

    Should we blame the weather?

    This week the US Census followed the Federal Reserve's Industrial Production - showing a manufacturing contraction for January 2014.

    It is interesting to me that the ISM manufacturing survey and ALL of the regional Federal Reserve manufacturing surveys showed expansion in January 2014 - so much for either the accuracy of surveys or the accuracy of data collection by the Fed or US Census.

    (click to enlarge)

    Some of the details of the US Census manufacturing release this week:

    The 3 month moving average of unadjusted new orders continues to decelerate.

    3 Month Rolling Average - Unadjusted Manufacturing New Orders (blue line), Inflation Adjusted New Orders from the Unadjusted Data (red line)

    (click to enlarge)

    US Census Headline:

    • The seasonally adjusted manufacturing new orders is down 0.7% month-over-month, and up 1.2% year-to-date.
    • Market expected month-over-month growth of -1.6% to +1.0% (consensus -0.7%).
    • Manufacturing unfilled orders up 0.1% month-over-month, and up 6.9% year-over-year

    Econintersect Analysis:

    • Unadjusted manufacturing new orders growth decelerated 0.6% month-over-month, and up 1.8% year-over-year
    • Unadjusted manufacturing new orders (but inflation adjusted) up 0.5% year-over-year
    • Unadjusted manufacturing unfilled orders growth decelerated 0.2% month-over-month, and up 6.9% year-over-year
    • As a comparison to the inflation adjusted new orders data, the manufacturing subindex of the Federal Reserves Industrial Production was growth decelerated -0.8% month-over-month, and up 1.5% year-over-year.

    The Econintersect Economic Index for March 2014 is showing a moderate growth deceleration. There are soft data points we watch outside of our index which bears watching. Nothing at this time is pointing to real economic contraction, but there is enough data sets in the warning track to let you know that the economy is far from running on all cylinders.

    The ECRI WLI growth index value has been weakly in positive territory for over four months - but in a noticeable improvement trend. The index is indicating the economy six month from today will be slightly better than it is today.

    Current ECRI WLI Growth Index

    Initial unemployment claims went from 348,000 (reported last week) to 323,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate. The real gauge - the 4 week moving average - marginally worsened from 338,500 (reported last week as 338,250) to 336,500. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

    Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line), 2014 (orange line)

    (click to enlarge)

    Bankruptcies this Week: Sorenson Communications, Privately-held MACH Gen, USEC

    For a complete list of economic analysis and opinion this week - [click here]

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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  • Moon Kil Woong
    , contributor
    Comments (13495) | Send Message
    Manufacturing is probably down because retailing is down. Will the market remain blissfully ignorant until you see the service sector, housing, and everything else down too? One thing tends to follow from another.


    In reality, if it wasn't for perceived wealth expansion in asset prices like homes and the stock market, income stagnation would already have every market signal turning red as it becomes clear growth is not sustainable without a huge pickup in wage growth.


    Of course, this can be stalled by watering down the requirements for borrowing like we did with student loans, but with dire consequences like NINJA and HUD 3.5% home loans (which are still offered to sucker poor people today).
    8 Mar 2014, 10:58 PM Reply Like
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