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Monday, April 02, 2012

Yesterday Was April Fool's Day

So I didn't post the data I was going to post on China because it was going to be too confusing.

Chinese Markit PMI was released dated April 1st. Headline 48.3, with falls in employment. The primary significance of this is that since there was significant worsening from February, the universal print meme that the Chinese economy would "trough" in Q1 must be wrong. So now HSBC has adopted the idea that it will trough in Q2. Huh:
Link
China isn't close to a trough. It's about in mid 2008, compared to the US sequence. There seems to be a huge fallout pending in construction activity. Car sales aren't good, but truck sales might be worse. The Jan-Feb period auto sales fell 4.4% YoY, and total sales, which includes trucks and buses fell 6% YoY. Domestic orders seem to be taking the leading edge down now for total Chinese manufacturing, and this is not going to be that rapid a sequence. The government is going to try to throw money at it. That will have some effect. Inflation for consumers is stickiest on stuff like clothing and food, which is unsurprising but not a good indicator.

European PMI's are worse, with Eurozone total at 47.7, sharply down from February. Germany slid to 48.4, but France collapsed in March. 46.7!??? Main area of weakness for France was reported as domestic demand. The flash (prelim) was so much better that we must presume conditions worsening over the month. Employment fell. Prices rose. Italy reported 47.9, better than France, but don't get too hopeful - inventories rose and new orders and work on hand fell hard - we're not exactly looking at expansion soon. Employment is still falling. Spain - prices up, new orders down, employment down, 44.5. The shocker is Germany. The best Eurozone performers were Austria and Ireland at 51.5. That doesn't carry much water to offset France. German retail sales have not done well so far in 2012, even though unemployment is below 7% now. German workers are going to be pushing hard for meaningful wage increases this year, with major strikes possible. The more consumer-product oriented manufacturers of Europe are thus not getting as much of a push as hoped from German prosperity.

It would seem that costs are impacting manufacturers and causing some of this "next leg" down.

Now, when you go back to the Chinese figures and realize that Europe is a very important export market for China, the situation becomes even more daunting. The eastern bloc is mixed. Poland is hanging in at 50.1. The Czechs jumped up nicely to 52.1, with the Czech manufacturing economy having apparently come off an intermediate low late in 2011. Russia has been weakish so far this year, with a little job-shedding.

Taiwan and South Korea are moving up, having hit at least transitional lows late last year (similar to the Czechs). Some of this has got to be related to the relative improvement in Japan, but that improvement isn't very strong yet. Japanese business is increasingly more dependent on Chinese growth, so the internal improvement expected is going to get no help there, under the circumstances.

In Europe, the best growth in orders is stemming from the US. (Netherlands and Germany). But the US is not in a strong growth mode. Still, USA manufacturing surveys, credit surveys and Manufacturing PMI do point to the US being a relatively hot spot on the world map. This is why you have Canadian grocery chains trying to sell $30 dresses in Manhattan.

Still, you have bottom line figures that indicate future demand strength in the US looking pretty poor. Incomes are stagnant at best, and for lower-income persons really dropping. Consumption drops in electricity, food and fuel indicate that most US consumers are shaving their pennies to get by, and making US consumers look very like German consumers. Although we're more spendthrift on average. But in the US, food-at-home real spending on food declined in Q3 (marginally), and 2.2% in Q4 2011, and that goes right in line with utilities and gas. Q4 final GDP, Table 3, read it and weep.

Commodity prices will still be sustained for quite a while on money insertions, but this bubble is now clearly a bubble that is doomed to deflate in real terms.

My brilliant theory on construction activity in 2012.... Remember that one? Early indications were pretty positive, but it's not going too well, is it now? And mind you, the weather was unbelievably favorable:

There's nothing like getting back to 2010 levels to make you think "strong expansion"!!!! Whoooo, baby, the ditch is the limit!

If we want to keep this going we all need to run out and buy cars. Two each! But don't drive them - that would support gas prices and be fatal! Just leave them in the driveway with large, colorful Obama campaign stickers plastered all over. Be sure to insure them with comprehensive coverage, because somebody biking by to go to the supermarket might become offended and attack.

There are 20 carload categories on weekly US rail. Last week, 9 of them moved to YTD YoY declines. My skipping recession forecast is like a hippo trying to balance on one toe. Theoretically, there is a chance. Very definitely. That hippo is one heck of a ballet dancer! Very strong toes!


Comments:
Tour de force!
 
You are the highlight of my internet day. Thanks, MOM.
 
I love the post-fool's day snark. Top form!
 
Mark - anyone can snark well at their own idiocy - as long as one is willing to be an idiot.

I was quite SERIOUS about the "couldn't post this on April Fool's Day" bit.
 
MOM,

In any event, you are quite the trend-setter.

April 2nd has become the new April 1st! ;)
 
Bonus thought.

If we want to keep this going we all need to run out and buy cars. Two each! But don't drive them - that would support gas prices and be fatal! Just leave them in the driveway with large, colorful Obama campaign stickers plastered all over. Be sure to insure them with comprehensive coverage, because somebody biking by to go to the supermarket might become offended and attack.

TOP FORM! :)
 
I'm glad I read this. My doom self was wavering. The local area (east bay, ca) seems to booming again. People are getting in bidding wars over real estate. New cars are abundant and so are high-tech jobs.

And yet, gas and food seems crazy. Have I become one of those premature old guys ranting about inflation?
 
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