U.S. Manufacturing Index At Worst Level Since 2009

[Purveyor]

Source: CNN

First China, now the United States.

America's manufacturing sector shrank for the second straight month in December. The industry's key index -- ISM -- hit 48.2% in December, the lowest mark since June 2009. Anything below 50% is a contraction and a month ago it hit 48.6%.

The index has fallen for six straight months.

"The trend is certainly heading in a direction that would ring alarm bells," says Sam Bullard, senior economist at Wells Fargo.
It's bad news especially after a private survey on Monday showed that China's factory sector had decelerated further. The weak data from China sparked off a global selloff in stock markets.

The U.S. manufacturing contraction didn't help: the Dow fell over 400 points to new intraday lows after ISM came out.

Read more: http://money.cnn.com/2016/01/04/news/economy/us-manufacturing-shrinks-again/

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[forest444]

1. The Institute for Supply Management and the Purchasing Managers' indices can be misleading.

Since "sentiment" weighs heavily in each of these related barometers of "conditions" (rather than actual output).

Besides being far too subjective a variable, sentiment can also be influenced by the fact that most purchasing managers are brainwashed Republicans.

I remember the ISM just plummeting in the months leading up to the 2000 election (widely publicized by the media at the time to the point of hysterics); but declining only slowly during the 2008 collapse (once elections were out of the way, their index crashed too of course).

That said, growth in industrial production has really stalled over the last year - and actually declined 1% y-o-y to November 2015 (the latest data). Even so, it's still 20% higher than its low point in June 2009.

[KT2000]

4. Do you know how

manufacturing is calculated for US companies that have their products actually manufactured in their own businesses in China?
If company X is purchased by a holding company and the manufacturing jobs are sent to China in the name of company X, owned by the holding company - is that US manufacturing or China manufacturing? Company X may not have any facilities in the US but it does report to the headquarters and computer system located in the US.

[forest444]

7. Makes sense to me.

One look at the official industrial production index, and anyone can see that those numbers are smoking.

A good, alternative measurement of industrial production in the U.S. was the index of electric power use in manufacturing - which during the '70s almost matched industrial production growth rates (25% vs. 30%), but which by the '80s and '90s showed ever greater discrepancies (10% vs. industrial production growth numbers of 20% in the '80s, and 50% in the '90s).

The Fed stopped publishing this data altogether in 2005 - the same year they stopped published M3 (broad money supply) data, you might recall.

Liars, damned liars, and statistics.

[Yo_Mama]

6. Well, Chicago Business Barometer collapsed to 42.9.

Really an epic fall.

I suspect this is real, and that another recession has begun.
https://www.ism-chicago.org/

Rail's been rough for months, and in the last five weeks has really taken a dive. Freight is usually the first indication.

C&I delinquencies look recessionary too.

[forest444]

8. The temptation to trigger a recession in an election year may indeed be too much to resist.

Big business is, as you know, still in bed with the GOP (even if they sometimes have a little sumthin', sumthin' with the Democrats). The same, unfortunately, can be said for most small and medium businesses (despite historical results).

There's no question that, even with the caveats I mentioned, we're in a slowdown - a 'growth recession'. Given that scenario, and the utter impossibility of ditching the sequester (which is basically fiscal austerity) for the time being, it wouldn't take much to push the economy into an outright recession.

And if oil prices bounce back over the next few months (and this Iran/Saudi thing could just be the thing that does it), then fuhgeddaboutit. It'll be "the economy, stupid" all over again.

[Yo_Mama]

11. I don't think anyone's trying to trigger a recession. But I think one has begun.

I think NBER will make it official late summer, probably dating initiation to March or so.

[forest444]

12. I'm with you there.

But I think we ignore to our peril the almost certain fact that political considerations are also a playing a part in this.

I remember reading, for instance, of allegations of a "select list" of big business leaders who had pledged to Senator McCocaine to keep purchases and, above all, hiring down in the months prior to the 2012 election (alas, to no avail).

No evidence ever surfaced of this select list, of course; but considering this was Senator Mitchiavelli we're talking about, I don't doubt it.

[Igel]

13. The enemy is omnipotent and omniscient.

When they're in charge, though, they're bumbling fools.

That's the take-away from this.

[forest444]

14. Life is full of irony

Take Argentina, for instance.

As you may know, a month ago voters there narrowly elected a xenophobic, elitist, laissez-faire candidate (Mauricio Macri). Macri was able to pull this off because a) he had the staunch support of most big media in Argentina, which spent the last 7 years pursuing a relentless, Breitbart-style attack against the recently retired progressive President, Cristina Kirchner; and b) because he had the similarly staunch support of big landowners (who were anxious to have their taxes cut, even eliminated), the non-bank financial sector (who of course want wholesale financial deregulation), and the far right (which resents Kirchner for ongoing trials for crimes against humanity for dictatorship-era crimes and reforms such as marriage equality and safety net programs). Much of the foreign press (particularly business rags) joined this right-wing bandwagon as well.

Well, they got their way (narrowly). And now Macri has given Argentina sharply higher prices (by way of a sudden devaluation, which benefits the wealthy at the economy's expense) and three months of self-declared "rule by decree" (which of course are being used to enact and rescind laws without Congressional approval, force through judicial appointments without Senate review, and dismiss journalists from their posts, among other things).

So now, Macri is not only in all-out damage control mode (mostly through friends in the courts and big media), he has to deal with a jail break of three convicted murderers who were released by a key ally of his (Governor María Vidal) after they falsely testified (on tv, not under oath) against her opponent - an October surprise which gave her a narrow victory of her own.

In short, electing these ham-handed right-wingers was the best thing to happen to progressives in Argentina. Something similar can be said of the Rajoy regime in Spain. Ah, the irony.

[Yo_Mama]

17. McCain wasn't running in 2012 - Romney was. And I have never, ever

seen any willingness of business leaders to take an economic bullet for some "cause".

It's extremely negative to their own interests to do something like that. They believe their donations are what is required to protect their interests, and they give to both parties.

[forest444]

18. That was McConnell I was referring to.

http://www.thenation.com/article/mitch-mcconnells-freighted-ties-shadowy-shipping-company/

The 'select list' was, if it existed, obviously intended to be in place for no more than three or four months (up to Election Day).

Cutting back on hiring and some purchases for that length of time isn't likely to hurt business at a large corporation; indeed, they do that on a rolling basis all the time, even in periods of heady growth. But if enough agree to do so in the very same quarter, it can certainly impact headline figures such as unemployment, jobless claims, durable orders, and GDP growth for that one quarter (presumably the third, which s always published just days before the election).

It's just an allegation, as I mentioned; but a fairly credible one, considering the craven partisanship of McConnell and whoever he got to sign on to this (which apparently wasn't that many people).

[davekriss]

16. Leading Indexes are still in expansion territory

Before every recent recession, the index collapses. It hasn't collapsed yet, so maybe there's some hope.

https://research.stlouisfed.org/fred2/series/USSLIND

[doc03]

2. WTF just last month they started to raise interest rates because of the

recovering economy and job market.

[Yo_Mama]

9. I think they started to raise them because they didn't know what to do when the nex recession

began. I think they waited too late.

[edhopper]

3. The Dow and S&P today

was due to the crash in China.

[jtuck004]

5. We invest in what is important to us.

Goldman Sachs only earned $2.3 billion last year, grabbed $10 billion in TARP, then paid out $4.8 billion in bonuses in 2008 — more than double its net income.

Morgan Stanley (Stock Quote: MS) only earned $1.7 billion last year, received $10 billion in bailout funds, then paid $4.475 billion in bonuses, nearly three times their net income.

JPMorgan Chase (Stock Quote: JPM) only earned $5.6 billion in 2008 and received $25 billion from the government, but it paid out $8.69 billion in bonus money.

Citigroup (Stock Quote: C) and Merrill Lynch suffered a combined $54 billion in losses in 2008. The banks received a total of $55 billion in bailouts and paid out $9 billion in combined bonuses.
...

http://www.democraticunderground.com/10027493387

[Cassiopeia]

10. Gee, what did they think outsourcing does?

If these are the best and the brightest we needed to save in 2008 then we are truly fucked.

[hollowdweller]

15. Until we restore living wages and benefits there will not be enough demand so production will fall

We have to get peoples wages up and we have to keep the financial sector of the economy from taking an unequal share of the GDP.