23 May 2011

No Way to Pretend that this Mangy Dog is a Beautiful Princess

More... FinancialArmageddon: Not a sense of recovery wherever you turn

The global economy remains devastated, despite all popular claims to the contrary. And it is not just Greece, Ireland, Spain, and Portugal which are in trouble. The US is beginning to feel the hurt from ludicrous fiscal and monetary policies which date back to the 1970s -- but which have reached particularly destructive levels under the Obama-Reid regime. The global economy still pivots around the US economy. And that is bad news all around.
1) Existing home sales for April were down 0.5% to 5.05 million as compared to 7.2 million at the peak. Inventories of homes for sale increased to a 9.2 months, the highest since December while prices were down 5% from a year earlier.

2) April housing starts dropped 10.2% to 523,000, barely above the recession lows, and below any level prior to 2008. According to the National Association of Home Builders (NAHB) traffic of potential buyers was still extremely low. Keep in mind that this is an organization that usually puts a positive spin on any results.

3) While weekly initial claims for unemployment insurance declined to 409,000 from the prior week, the number has now been over 400,000 for six straight weeks after a period of coming in below that level.

4) The Philadelphia Fed Index for May fell sharply to 3.9, losing 39.5 points in the last two months. This is also well below the 1st quarter average of 32.9. Both new and unfilled orders dropped significantly while inventories also declined, indicating that the inventory buildup that helped support the recovery may be moving back in line with demand, which has been growing less than production.

5) Consistent with the above, April industrial production was flat. It is likely that production, which had consistently been running ahead of demand, is being reduced as inventories that were depleted during the recession have now caught up. This also may explain the higher level of initial claims.

6) The Empire State Manufacturing Survey was also down 9.8 points to 11.9, the lowest level since December. This index therefore confirms the Philly index and suggests similar lower results from the ISM manufacturing index.

7) The April index of leading indicators declined 0.3%. While one month does not make a trend it was the first monthly drop since last June, and fits in with what other indicators seem to be telling us.

8) Similarly, the ECRI Weekly leading indictor has been down for three of the last five weeks and has been about flat since mid-December after rising steadily from the recession lows. This is indicative of at least a pause in coming economic growth, and perhaps something worse.

9) April core retail sales increased only 0.2%, and were probably flat to slightly down when adjusted for inflation. Higher income from reduced social security withholding was more than offset by higher gasoline prices, tepid wage increases, high unemployment, lower home prices and recessionary levels of consumer confidence. And this is happening even before the end of QE2, which has been keeping the economy afloat since November.

10) The April Small Business Survey, after rising weakly from recession lows, has now dropped 3.1 points in the last two months. Even at its most recent high it was below any level in its history prior to 2008. Key segments that declined were plans to increase employment and capital expenditures. In addition the number expecting sales to rise also dropped.

11) In addition to the domestic concerns cited above, the global picture is also not looking too rosy. ECRI's long leading indicator of global industrial growth peaked last August at 0.7 and stood at 0.1 in March. ECRI managing director Lakshman Achuthan stated "There's a downturn in global industrial growth in clear sight". EU production fell in March and retail sales have been flat for six months. In the UK there's been no GDP growth for six months. Japanese GDP dropped 3.7% annualized in the 1st quarter and 3.0% in the 4th. Note that the earthquake occurred on March 11th, toward the end of the quarter, so cannot be fully blamed for the 1st quarter and not at all for the 4th. Industrial output in all of the BRIC nations seems to be slowing, and current monetary and fiscal policies suggest more to come.

All in all it seems to us that the odds are high that a domestic and global economic slowdown is already in place. In the U.S. the slowdown is happening with only six weeks to go before the end of QE2, a program that has been a major prop for even the tepid recovery we've undergone so far. For the stock market nothing seems to matter until, suddenly, it does. _ComstockFunds
Did you imagine that China is ready to take over as the global economy's driving force? Better think again. More here.
via EconomyWatch

Drowning in Debt: Why the economy still cannot seem to recover.

Reading the consequences of debt: The hidden taxes of debts, deficits, and a deflationary : inflationary chaos -- along with dysfunctional government regulations, incentives, corruption, and laws -- combine to crush any nascent recovery in its cradle.

But the disaster is compounded by the effect of demographics: If human capital is not growing and improving, any realistic hope of economic growth and development is delusional.

Japan is the canary in the coal mine, the early warning signal for the rest of the world, on the dangers of debt and demography. The PIIGS of Europe are following closely behind. Russia would be a global economic basket case except for Siberian wealth -- and how much longer can the bear hold on to Siberia in the face of shrinking demographics and evaporating human capital?

Will the people of the west ever wake up to what they are doing -- and allowing to be done -- to themselves? If not, what are the alternatives? Who is John Galt?

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Blogger UTR said...

"Note that the earthquake occurred on March 11th, toward the end of the quarter, so cannot be fully blamed for the 1st quarter and not at all for the 4th. Industrial output in all of the BRIC nations seems to be slowing, and current monetary and fiscal policies suggest more to come." love it!
even though the Japanese have a low GDP, they are such a strong country. There is no doubt that the Japanese are very well prepared when it comes to these disasters. Americans need to get better prepared no doubt. whether with furniture straps or purchasing a good earthquake kit. anyways thanks so much for the info, i'm keeping up with statistics for the Japanese - i am curious to know your input on how this will affect American GNP or even gdp

Monday, 06 June, 2011  

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