Monday, June 27, 2011
Eek, Squeak, Yelp
The overall report was less depressing. The hours worked index was still positive, if only marginally, capacity utilization was -0.8, falling 11.9 from April, and new orders and employment were still increasing. Future expectations are still marginally positive (the red dotted line above). I'm really surprised, though - I thought Texas would be pretty decent. This is not pretty decent. I can't really claim that it is more worry than anything else because of the large drop in capacity utilization.
ATA Truck Tonnage for May was bad also. In just a few months the direction has changed a lot. We kind of knew that because of diesel; so far diesel supplied has not rebounded. Last week the four week supplied average was down 5.7% YoY, which does not forecast well for ATA Truck Tonnage in June. Rail is holding, and may be doing slightly better in June, but it is probably doing that from displaced truck freight. Much more freight rolls on trucks than trains.
Tomorrow we get Richmond Fed. If it's not good I don't want to look at it; last month it was surprisingly bad. The Richmond Fed also puts out the survey of agricultural conditions, which was neutral with price concerns dropping demand for pricey stuff, and lenders worried about credit. Kansas City is due to weigh in also, I think on Thursday. K.C.'s May survey was not that much fun; the headline was neutral at 1, but production, shipments, new orders and the average workweek indices dropped, so I probably don't want to see June K.C. either:
I'm thinking that the odds that I will really like the next bar on that graph aren't that hot, but it should update automatically so I can just scroll down here, and if it doesn't look too bad, I'll deign to read the report.
I have been saving the following for an opportune moment full of cheer and hilarity when everyone would enjoy good laugh. Unfortunately, after looking at the Dallas Fed survey I realized that such a moment may not come. However, if you are personally in a good mood, you might enjoy St. Louis' scholarly review of the burning issue - could it be, that by any unforeseen and indeed unforeseeable chance, that an easy money policy might drive up asset and commodity prices? Could it be and who'd a thunk?
I do have to look at June car sales when those figures are released. Also inventory. I use Ward's figures. I have been sadly staring at MV shipments on the rail reports, but sales can be different so perhaps it won't be too bad. In May car sales dropped YoY and, cough, inventories rose for Chrysler and GM, although not for Ford and not for most of the foreigns. However looking at April beginning YTD MV rail shipments (still up 12.8% YoY) versus the most recent week's YTD YoY of 7.2%, I don't think I'm going to like the Ward's data that much. Of course I have to read Chicago PMI, NACM, and I'll look at the ISM indices. Somewhere in there something will look better.
Anyway, when I sum up my reading plans for the near future, I realize that I am only looking for good news to rebut the highly probable reality that Q3 is going to mark the slide into outright contraction. The reason is timing; end user inflation for most primary goods is still escalating, and oil prices won't have time to fall far enough to offset it. Most older people are facing higher drug costs and the doughnut hole this summer; they'll pull back hard on spending. Their spending would be sparse anyway, because food costs are too high and no SS COLAs for several years have impacted their finances most unfavorably.
The hit on the service businesses is proceeding along, and actually the economic infusion at the top end (FICA cuts for high earners) falls off hard by August (they start reaching cap then)/September. So relatively that contribution fades out but the effect of inflation is still there.
Then to cap it all, due to Congress' failure to extend unemployment benefits for the 99rs, by late summer the bulk of those who haven't found employment will find themselves with no unemployment benefits. This spring the drop off has been pretty hard, and it is undoubtedly affecting some spending patterns.
Economic stimulus in 2011 was very front-loaded. Initial claims are up. What can I say? When oil prices are this high and the Dallas Fed produces a survey that ugly-looking, it is hard to be optimistic. I began this year with the thesis that everything depended on auto sales - that this was the sole remaining real growth edge for the economy. It appears that we have lost that growth edge. If this is true, it is going to be hard to pull out and see much in the way of growth in the third quarter.
There are pockets of real growth out there remaining, but you have to understand that we were in a bad position at the beginning of the year. The net Gross Private Domestic Investment over Q4/Q1 was negative. We do have suppressed demand rebounds still on things like cars, but an unemployment rate over 8% sharply limits the scope, and the negative trajectory for many service businesses is going to limit their equipment spending.
Housing and CRE is bad this year and will not have any significant impact on growth. The only possible growth avenue this year was from trickle-up from the bottom 40%, and the Fed;'s failure to realize that boosting asset prices had to come at the cost of real incomes for the bottom 40% pretty much destroyed that, then Congress and our dear, dear Community Organizer made sure to organize the bottom 40% out of the growth picture. It was a one-two blow that our economy was too weak to withstand.
So this is the Fed downturn - an economic horror movie probably coming to a theater near you. If Andrew Jackson were running for president in 2012, he'd win in a landslide.
Right now I am struggling with this reality. People will die because of this. Right now I truly despise all the talking heads.
a tweak there, and all will be good.
A massive restructuring of the tax and trade policies as well as a rethink of what our lifestyles should be, are needed. Lots of scared cows
need to be sacrificed.
Why does such a desperate search to find any excuse to have a bit of hope make me laugh so much?
"Then to cap it all, due to Congress' failure to extend unemployment benefits for the 99rs, by late summer the bulk of those who haven't found employment will find themselves with no unemployment benefits."
Hey -- there's your upside. That will cause workforce participation to drop and subsequently the official unemployment number might drop (or at least rise more slowly).
"If Andrew Jackson were running for president in 2012, he'd win in a landslide."
Wait, what? Why? Because he would end the central bank? We already have a candidate that has been just itching to do that for decades. (Though, Andrew Jackson didn't mind stepping on the constitution when it stood between him and what he wanted done. So I guess his odds of actual success might be better.)
"People will die because of this."
One aspect of the tragedy will be that some of them will have voted for the very politicians who will be (at least partly) responsible for their own death.
I look at life in terms of time and opportunity though, and view death not as bad in itself but as time and opportunity lost. And from that perspective, even if we all lived in perfect health to a ripe old age, if we lacked the opportunity to do what we want with any of that time, we may as well not even exist. Whenever our time and opportunity is stolen by a tyrannical system, we lose chunks of our lives.
Thank you, truer words have rarely been spoken. I think you're saying what a lot of us are thinking and fretting over in the day's quiet times or as we fall asleep at night.
And, though I hate to pick a nit, I think the Jacksonian Democrats or rather their modern day incarnation have already been heard from. So I really hope they're not the winners of 2012. They've been all hat and no cattle, though they sure do talk pretty. I think they're more akin to Hans Gruber than Old Hickory, and yes I think they really are exceptional crooks, but nothing more.
In other news, over the weekend TEPCO announced that it finally had its water decontamination system running. So I just went over to get a progress report, thinking that there would be, you know, progress. GOOD news.
Today is not my day for finding what I seek.
He'd do it. He might get impeached, but he'd do it. He ignored SC decisions when he felt like it. Present day versions, not so.
I don't think Andrew Jackson would be good long term for the US - the Constitution means we have the right to hurt ourselves this badly, and no one has the right to prevent it until we wake up and throw the bums out.
But I do think he would win.
I can't predict how people will vote when they're truly scared out of their shorts...
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