U.S. Economy: Manufacturing Growth Slows in May for Sixth Month

[swag]

http://quote.bloomberg.com/apps/news?pid=10000006&sid=arCjYy.YGTuY&refer=home

U.S. Economy: Manufacturing Growth Slows in May for Sixth Month
June 1 (Bloomberg) -- U.S. manufacturing expanded in May at the slowest pace since June 2003 and cost pressures eased, boosting prospects Federal Reserve policy makers may soon stop raising interest rates.

The Institute for Supply Management said today in Tempe, Arizona, that its factory index fell to 51.4 in May, the sixth straight decline, from 53.3 a month earlier. Orders, production and employment slowed last month. Readings higher than 50 indicate growth. A gauge of prices paid for raw materials declined by the most in three decades.

Slower manufacturing growth and fewer price pressures suggest the economy is expanding at a pace that won't fuel inflation. The report, along with comments from Fed Bank of Dallas President Richard Fisher that policy makers may be close to ending their string of interest-rate increases, buoyed stocks and Treasury securities.

``The thing that impressed me most was the drop in the price index,'' said Anthony Chan, a senior economist at JP Morgan Asset Management in Columbus, Ohio. Chan forecast the index would drop to 51.5. Fisher's comments and the factory report ``tell me the mission to raise rates isn't totally accomplished, but we are getting close.''

. . . more

[bemildred]

1. What about all the debt we manufacture? nt

[hatrack]

2. They're leaving out the bullshit totals, I suspect . . .

Heaven knows we're the world leader in that production sector.

[TexasLawyer]

4. Don't joke... RNC apologists actually believe

that the US balances its foreign trade accounts by "selling" treasuries!!!! Check this out. It's delusion writ large.


http://www.townhall.com/columnists/walterwilliams/ww20050525.shtml

Our trade deficit
Walter E. Williams

May 25, 2005

I buy more from my grocer than he buys from me, and I bet it's the same with you and your grocer. That means we have a trade deficit with our grocers. Does our perpetual grocer trade deficit portend doom? If we heeded some pundits and politicians who are talking about our national trade deficit, we might think so. But do we have a trade deficit in the first place? Let's look at it.

Insofar as the grocer example, there are two accounts that I hold. One is my "goods" account, which consists of groceries. The other is my "capital" account, which consists of money. Let's look at what happens when I purchase groceries. Say I purchase $100 worth of groceries. The value of my goods account rises by $100. That rise is matched by an equal $100 decline in my capital account. Adding a plus $100 to a minus $100 yields a perfect trade balance. That transaction, from my grocer's point of view, results in his goods account falling by $100, but when he accepts my cash, his capital account rises by $100, again a trade balance.

The principle here differs not one iota if my grocer was located in another country as opposed to down the street. There'd still be a trade balance when both the goods account and the capital account are considered. Imbalances in goods accounts are all over the place. For example, my grocer buys more from his wholesaler than his wholesaler buys from him. The wholesaler buys more from the manufacturer than the manufacturer buys from him, but when we put capital accounts into the mix, in each case, trade is balanced.

International trade operates under the identical principle. When we as consumers purchase goods from China, and the Chinese don't purchase a like amount of goods from us, it is said that there's a trade deficit. But instead of purchasing goods, the Chinese might purchase corporate stocks, bonds or U.S. Treasury debt instruments. Just as in my grocer example, there is a balance of trade. The deficit in our nation's goods and services account, sometimes called current account, is matched by a surplus of equal magnitude in our capital account. A large portion of surpluses in our capital account consists of U.S. Treasury debt instruments held by foreigners. As of June 2004, China held nearly $200 billion, Japan over $1 trillion, and Europe combined held over $2 trillion.

<snip>

[BillZBubb]

6. Walter Williams is an idiot.

If there was any doubt this "analogy" seals the deal.

It's debt Walter, not balance. It's friggin' debt. Of course the accounts "balance"--that's pure sophistry. But they are selling us value added goods. We are mortgaging our already bleak fiscal future by borrowing more and more. Get a clue.

Suppose you go to your grocer and buy your food. But instead of paying cash, you always put it on a running tab. You always "pay" this way. The grocer is eventually going to want his money. Then where is your "balance"?

[TexasLawyer]

10. It's such a pathetic analysis

that it is almost a humor piece. I actually laughed out loud when I read it.

I would love to see what someone like Paul Krugman would do with an article like this.

[Elwood P Dowd]

7. Is this aimed at third graders or adult republicans?

Yes, you have a deficit with your grocer, your barber, and others. However, when the month ends your income is equal to or greater than your deficits. The US can't do that anymore because we've shipped production, and thus our income, overseas. We sell off assets or borrow money from the Chinese, Japanese, and others to cover our losses. That's what Walter calls balanced trade. Makes sense to repukes.

Why don't you try another example Walter. Mr Smith loses his $15.00 an hour manufacturing job and is forced to take an $8.00 an hour job at Wal Mart. He has fixed monthly expenses, and the $8.00 an hour job doesn't cover them. What does he do? He starts his own eBay store and begins selling his assets. His stereo, his CD collection, his guns, his jewelry, and other items are "for sale". Then he sells his house and buys a mobile home. He runs up his credit cards to the limit and only pays the minimum payment every month. This is more in line with what is happing with our trade policies Walter. Now go back to kissing Rush Limbaugh's fat ass.

[swag]

3. An additional note and reference

Paul McCulley at PIMCO - www.pimco.com - recently noted that the Fed has never raised short-term rates when the ISM has been below 50 (i.e., has not been in "expansionary" territory.) The futures markets are seeing one more Fed rate increase before a stop or pause.

Additionally, the yield on the 10-year Treasury Note is down below 3.9% this morning on this news. Crudely put, mortgage rates follow longer bond yields. It's going to be hard to take any air out of the real estate bubble with Treasury yields in this territory.

Greenspan is in a spot at this point, bonds and real estate bubble-ized (and yes, I know the phenomenon is not ubiquitous, but the asset class, if you will, at the aggregate level is at an inflated value level), and inflation at an uncertain point.

Conundrum, indeed.

[nolabels]

5. Does the U.S. even still have Manufacturing

I thought they outsourced it all to Communist China :shrug:

[DavidDvorkin]

8. This must mean that the economy is expanding

By analogy with how the Admin. responds to bad news from Iraq.

[applegrove]

9. Why Bush wants private SS accounts. It would be a huge infusion

into the stock market and continue a bubble. Total bullshit! You take your recessions/corrections like a man. Think of all the young who have been tied into huge mortgages they will not be able to afford in the years to come. Another transfer from the middle class to the rich.

***holes!

[Barkley]

11. Manufacturing is one of the first things to go in a recession because

the purchase of new durable manufactured items like washers, dryers, and refirgerators can postponed. Instead of buying a new appliance when its broke or worn people can repair their existing durables at a lower costs.

[cliss]

12. I'm not sure I believe this "expert analysis".

Anthony Chan seems to be happy that the price index has gone down. "The thing that impressed me most was the drop in the price index".

Here's a quick tutorial on the business cycle: the business cycle goes up and down in a wavelike fashion. Economists have been interested in what forces the sine wave to move up or down.

Most importantly: what causes the business cycle to move downward, into its trough? This is where we get our recessions, layoffs, general misery.

Researchers discovered in the 30's that the biggest reason for the wave to turn downward was the Wholesale Price Index. Manufacturers are feeling the pinch, so they charge more for their goods. This starts a chain reaction which forces the wave down.

Now, about 1 month ago, there was a thread here in the LBN which mentioned that "Wholesale Prices Moving Up". I thought, OK, here we go. Now we'll start to see the typical events of a "down wave".

And NOW, Mr. Chan is claiming that prices are moving down? I don't believe it.

I've been seeing a lot of lying lately, and I trust nothing.