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Monday, August 01, 2011

Meanwhile, Back At The Ranch

There is a remarkably coordinated worldwide downturn in production. Probably scrolling through the Markit PMIs is the best way to see it. Sure looks like energy prices to me. The surprisingly bad Chinese PMI might be more related to auto sales than anything else. Power consumption is holding, but might be more attributable to the building craze.

The Australian economy seems to be cycling down pretty darned fast! If you look at that release, you note that they helpfully post some of the Asian PMIs along the right margin. That's because the Australian economy is chained to the Asian trend, although in this cycle domestic household debt is placing pressure on Australian domestic consumption. I was surprised by the depth of the contraction in Taiwan's manufacturing PMI.

US rail did not turn in a stellar performance last week. The YoY YTD for intermodal is down to 7%; on the week intermodal was basically flat year over year. Carloadings YoY YTD are at 2.4%.

This week we get the employment report, which at best just won't be bad, car sales, which aren't looking too good, various PMIs and such-like chaff, and we can all watch commodities rise, and wait for the inevitable crash, because we are reprising 2008 now in a disgustingly unambiguous manner.

This time some of the emerging economy banks may just start falling over. The Czechs and the Poles are still holding out - we just have to hope that the whole eastern bloc/Austrian line of loans doesn't fall out on us. That would really be painful.

You have to feel sorry for the Japanese. The yen's well below the 80 mark, and this is very painful for Japanese manufacturers. Also I am adding this link about their power supply problems - Japan is in a terrible fix; at this stage manufacturers are going to be forced to move production overseas, which will not help the moribund domestic economy. This has tremendous long term effects on their economic trajectory, and with a debt/GDP ratio near 200%, the fall of the Japanese economic powerhouse appears assured now.

US Manufacturing PMI doesn't look any better than ROW's - at 50.9, a drop of 4.4 from June, there is little to cheer about. The underlying details are not as bad as the headline, but new orders contracted again from 51.6 to 49.2, so one also can't use the inventory data to bolster too much optimism. Order backlogs down to 45.

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