Economy: Factory Orders=More Evidence of RECESSION

[unlawflcombatnt]

Today's Factory Orders report provided another opportunity for public deception and obfuscation of facts. Though March Factory Orders showed an annualized increase of 3.4% from the previous month, the long-term trend was downward. The March 2007 vs. March 2006 numbers showed a decline in all categories (except unsold inventories, which showed an increase).

Compared to March 2006, this month's New Factory Orders were down -$9.6 billion, from $436.533 billion in March 2006 to $426.918 billion in March 2007. This is -2.2% less than March 2006. The year-to-date (January thru March) numbers also declined -12.4 billion from the same period in 2006. This is a -1.1% decline. March 2007's Consumer Goods New Orders was -$3.6 billion less than in March 2006 ($156.465 billion vs. $160.104 billion). This was a -2.2% decline. The "year-to-date" decline from the 1st 3 months of 2006 was -$11.8 billion (from $447.949 billion down to $436.179 billion). This is a -2.6% decline. Thus total New Orders for manufactured goods showed year-over-year declines. There were also declines in the year-over-year and March vs. March New Orders for Consumer Goods.

Shipments of manufactured goods also showed declines in both the March vs. March numbers, as well as year-to-date numbers. March 2007 shipments were down -$8 billion from March 2006, for a decline of -1.9%. ($417.129 billion vs. $425.124 billion). The year-to-date decline was -$15.6 billion, or -1.3%. March 2007 shipments of manufactured Consumer Goods were down $3.6 billion from March 2006. This is a decline of -2.3%. The year-to-date decline in shipments of Consumer Goods was -$12.3 billion, or -2.7%. Below is a copy of Table 5 from today's Factory Order report from the Census Bureau. The "Percent Change 2007/2006" shown in the far right column applies only to the 1st 3 months of the year. (The chart has been edited to fit the page.)


Current (from 5/2/07)






For comparison, below is a copy of the same information for the first 3 months of 2006

May 2006




In contrast to the declines in New Orders and Shipments, Inventories have skyrocketed. March 2007's Inventories were $25 billion more than in March 2006 (from $457.4 billion in March 2006 to $482.5 billion in March 2007). This is a +5.5% increase in inventories.

Rising inventories, combined with declining shipments and new orders, means that Manufacturing production is exceeding demand. This also indicates a decline in demand for manufacturing workers, putting further downward pressure on manufacturing employment.

Today's report again demonstrates how the government stresses the set of numbers that have a positive interpretation, while downplaying the negative. In this case, they've minimized the numbers showing the year-to-date comparison, and the seasonal changes that normally occur from February to March. Instead, they've touted the February to March increase. In fact, there is normally an increase from February to March. And this year's was smaller than last year's. Last year's February to March increase was +4.1% (compared to March 2007's increase of only +3.1%). More important, however, is the comparison of last year's "year-to-date" numbers (January 2006 thru March 2006). Last year's increase was a whopping +9.2%, compared to this year's DECLINE of -1.1%. Last year's (2006) Shipments of manufactured goods for the first 3 months increased 7.2% over the previous year (2005). In comparison, this year's first 3 months showed a DECLINE of -1.3% from last year's first 3 months. In addition, last year's March vs. March increase in inventories was only +2.8%, compared to this year's whopping +5.5% increase.

Today's report provides still more evidence that our manufacturing sector is in Recession. New Orders & Shipments are down compared to last year. In contrast, the unsold Inventory increase has doubled compared to the previous March. The usual March increase in Factory Orders was less than last year's March increase.

Combining the Housing decline and the Manufacturing decline (coupled with inventory increases), and adding in the real wage decline from October 2006, it's difficult to see how we aren't heading for a Recession. In fact, it's difficult to claim we aren't in one already.

unlawflcombatnt

Economic Populist Forum

[unlawflcombatnt]

1. Real Consumer Spending Declines -0.2% in March

Yesterday's Personal Income & Spending showed a monthly DECLINE in real Personal Consumption Spending of -0.2%. The report was deceptively interpreted as "positive" economic news, though even the "nominal" (non inflation-adjusted) increase of 0.3% was only 1/2 the of the 0.6% increase predicted. Though nominal wage & salaries increased 0.7%, the Consumer Price Index increased 0.9% for the month of March on an annualized rate. Below is link to a copy of Monday's Personal Income & Spending Report from Briefing.com. Previous numbers are in parenthesis next to current numbers. The "real," inflation adjusted numbers are underlined in red.

Personal Income & Spending-Modified

It appears that spending is finally starting to decline as result of declining home equity-financed spending combined with stagnant real wage growth. The housing bubble is bursting, and there's nothing on the horizon to take its place. The 1st quarter GDP growth of only 1.3% is not surprising, given the decline in real consumer spending. And this decline was predictable, given the combination of declining home equity extraction and stagnant real wages.

The only things rising are prices and Corporate media propaganda.

unlawflcombatnt

Economic Populist Forum

[PsycheCC]

2. Thanks for the numbers. When the inevitable recession arrives,

you'll be one of the few who actually predicted it. I'm amazed at how bullish analysts and the stock market remain, even in the face of all the negative numbers pointing the way downward.

[unlawflcombatnt]

3. Thanks

Actually there have been a number of economists predicting a recession for quite some time, including Nouriel Roubini, Dean Baker, and more recently Paul Krugman. I think Peter Schiff is also predicting a recession.

The problem is that economic comedians, like Larry Kudlow and his "goldilocks" nonsense, have stolen the air waves. The only thing the Corporate-controlled media allows the public to hear is positive economic propaganda.

Again, it's hard not to be calling for a recession when so many areas are declining. Real Consumer Spending declined -0.2% this month. Manufacturing is declining, Housing is collapsing, the subprime mortgage industry has fallen off a cliff, real wages have begun declining again, and capital investment is declining.

There's simply nothing left to keep the economy afloat except hot air and media propaganda.

unlawflcombatnt

Economic Populist Forum

[UrbScotty]

4. Wait until Michigan Republicans see this.

They like to say we're in a 'single-state recession' - like everyone else is doing okay, but only Michigan is in a slump.

[unlawflcombatnt]

5. State Slumps

I think a majority of states are in a slump. Every previously big manufacturing state is in trouble. In Baltimore, Maryland, Bethlehem Steel used to be the largest employer. Now they are no longer in existence.

In California the Housing Industry is in free fall. (And if Hollywood keeps putting out lousy, overpriced movies, it's also going to be in free fall.)

A lot of states are in big trouble, despite what media propagandists keep barfing up.

unlawflcombatnt

Economic Populist Forum

[unlawflcombatnt]

6. GM losses

I thought it would be helpful to include a link to the best of the many articles in the news today about the decline in GMAC and GM.

At least 2 other articles published today have largely obfuscated the GM's decline. The following link, however, provides the most clarity:

GM profit plunges after housing finance

"General Motors Corp. (NYSE:GM - news) on Thursday reported a 90 percent drop in first-quarter earnings, missing Wall Street estimates by a wide margin, as mortgage-related losses at its GMAC affiliate swamped gains in its main business....

But analysts raised concerns about both GM's remaining exposure to the riskiest segment of the U.S. mortgage market and the pace of the automaker's efforts to restore its North American operations to profitability.

Shares of GM dropped more than 3 percent, while its bonds weakened and credit default swaps widened..."

The full article can be found at GM profit plunges after housing finance

unlawflcombatnt

Economic Populist Forum

[unlawflcombatnt]

7. IBM to Lay Off 150,000 workers

In another outstanding article from the site "naked capitalism" titled The Paradox of Offshoring: IBM to Fire 150,000 US Workers, the author notes the plan by IBM to lay off 150,000 workers, and replace many of them with foreign workers. He also describes the logic (or lack thereof) of IBM's plans, and the general fallacy of the benefits of reducing labor costs to increase profits. He further quotes an article from " I, Cringely, The Pulpit," which gives more specifics on IBM's plan.


"According Robert Cringely at PBS, IBM is cutting at least 150,000 US jobs in its Global Services Division, and each US worker is to be replaced by a new overseas hire. This headcount cut, called Project Lean, bears out the populist view that corporate executives are greedy and outsourcing damages the American economy. As we noted in a recent post, models that analyze the benefits of free trade often omit the costs. In this case, one of the costs is wage suppression. 150,000 unemployed IT workers will have a significant impact on incomes of those with skills similar to that of the ex-IBMers....

Now why is this so terrible? American corporations are in the process of destroying the middle class. Henry Ford understood if you paid workers well, they'd buy more goods, including your products. A growing middle class created a virtuous circle: higher incomes and more jobs meant more consumption, which allowed business to expand and enabled them to pay workers even more.

Now companies are operating from a a self-destructive paradigm, a reversal of Ford's virtuous circle. They increasingly see employees as a cost, rather than an asset. More and more companies exhibit a Wal-Mart mentality: get by with as few workers as possible, and pay them as little as you can. That pattern has been most common in enterprises that use hourly workers, like manufacturing and retail, but it's becoming more and more common in the white-collar world. And the IBM move will make it respectable...."

unlawflcombatnt

Economic Populist Forum