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Tuesday, February 09, 2010

Amused And Confused

Amused: In a stunning display of government efficiency, the federal offices in DC decided to remain closed today. Does anyone believe that they'll be open tomorrow? Nah? I suppose there is a real question about whether they'll be open on Thursday, also, because they're going to get significant snow, and if they can't manage to open four days after the other storm, you'd kind of expect them not to be operational less than 24 hours after this one. It's nice work if you can get it.

Confused: December's wholesale sales and inventories report is out:

You'd have to expect that businesses would be restocking now. Sales were good in December. On the one hand, I would look at this and think that businesses are going to be sending in lots of orders which would boost us through March, at the minimum. On the other hand, why hadn't they already? This looks like an indication of very low confidence.

I will go back and look at the rail, trucking and manufacturing reports for the last quarter again. In December, on an NSA basis, YoY new manufacturing orders were up about 3.4%. YoY durable orders, however, were down about 2.4%. The growth was all in non-durable orders, which were up 9.3%. This probably means that there is a wave of imports coming.

Comparing non-seasonally adjusted December 2009 to December 2008, shipments for capital goods were down, shipments for construction materials were down, shipments for information technology were down, and shipments for capital goods were down. Shipments for computers and related products were up, and so were shipments for consumer goods (8.7%). See Table 5 on page 6. New orders were only up for computers and related, construction materials, and consumer nondurable goods. People are only ramping up spending on clothing, food, etc. Not a very strong showing, and it is a marker of the income problem.

Rail for December 09/08: Carloads were down 4.1%, but if the change in coal shipments had been excluded, they would have been up 6.9%. Intermodal was up 2.5%.

Trucking: On an SA basis, tonnage was up 6.9% for December 09 compared to December 08.

It's beginning to look like cost decreases more than volume, perhaps.... But I am not sure, because of the mix in categories. New orders for primary metals were up substantially Dec 09/08, but new orders for fabricated metals were down.

Some of this is pricing differentials. Some is clearly product mix. Raw material pricing is holding up better than for finished goods, and basic consumption items are way up in comparison to deferrable purchases.

I think there could be very bad implications for the economy if Congress doesn't wake up and do something about unemployment. They've got less than a week. There are some signs of life.

M_O_M, would it be correct to say that unemployment has shifted the consumer goods mix toward essentials, which are largely imported? If so, what happens to job creation going forward?
The only workable "jobs program" Washington could pass would be the one that promised to renew the Bush tax cuts (all of 'em), vowed to end any talk of carbon emissions control and promised to push health care "reform" off a few years.

We'd all be amazed at the leap in GDP that would ensue. Targeted tax credits, more gov't loan guarantees and increased infrastructure spending will prove just as disappointing as Porkulus.

The economic aggregates are nothing but statistical constructs. They can't be controlled -- though Obama and his merry band of Keynesians will, no doubt, continue to try.

But, as always, MoM, thanks for dredging through the numbers.
Neil - not all of them by any measure. Consumers spend a lot on services, shelter, and food.

Judging by the numbers, consumers have ramped up their spending on clothing and shoes, mostly in the lower-end bracket, although there have been spikes in certain areas in higher-end spending in those categories.

Clothing and shoes are mostly imports. Consumers are still spending relatively little on electronics, furniture, etc.

The biggest spike is in food, to be honest. The hiring noted in retail was mostly in the grocery/lower end clothing/shoe chains. I would expect that type of import to go up sharply.
Craig - your comments are quite interesting, because they kind of square with the commentary in the NFIB small business report.

Here's the latest one. Here's some of the commentary (which has assumed a gradually increasing tone of frenetic worry over the last few months):
Washington still does not get it. It pays lip service to the fact that small business generates half of private sector GDP and creates over two-thirds
of private sector net new jobs, but when it comes time to provide help, small business gets $30 billion IF banks decide to accept the TARP funds to support loans and IF the owners can subsequently get a loan from a bank. But for most firms, this dinky amount is of little help. More so, this new aid misses the main problem since only five percent of small business owners cite “financing” as their top business problem but 31 percent cite “poor sales.”
Instead, Congress is focusing on a health care bill that features crippling taxes and mandates for small firms, fully expecting to have it in place and implemented (10 years of taxes, seven years of “reform”) this year with unemployment at 10 percent and expected by many to rise. Lawmakers
also allowed the minimum wage to rise by nearly 11 percent in July 2009, catapulting teen job loss to over 500,000 and an unemployment rate of 27 percent in the second half even though the economy started growing. This was double the loss in the first half when GDP growth was plummeting. If the administration wants to count "jobs created and saved” it should also be accountable for “jobs destroyed or prevented.”

On top of all that bad news, small business owners fear Washington will then feel the need to “stimulate” us with even more spending and larger government (and taxes), the death knell for private sector vitality.

Oh, and Neil, if you are wondering about jobs, the NFIB small business survey tells the story. No jobs. Sales expectations poor, capital spending very low.

Larger businesses are mostly still trimming, and small businesses are not at the point at which most of them can spend.

Compensation at small businesses is being cut at an amazing rate.
Small business was dependent on the credit bubble to generate sales. Clearly those days are past with 32 million folks on food stamps and 12 million on unemployment benefits. Cutting taxes with two wars in progress,the end of the S.S. trust fund surplus, seems like a stretch. Ron Paul not exactly a liberal has written that the United States needs to shut down its foreign wars and various outposts since the reality is that we can't afford them. Clearly the citizens are living in a fantasy world if they think the government can create jobs,reduce taxes and continue this level of government spending.
Thank you very much for this educative read MoM.

As for Congress' urgency on the matter, I'm not holding my breath.
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