Economic Reports 03/01/07

Summary: Hold on, its going to be a rough one, I think we need a bigger boat...

Uptrending initial claims as more workers are losing their jobs, and they are finding it harder to find a new one.

The carnage continues in the automotive and manufacturing sectors with disappointing sales results and further production cuts which will result in further job losses.

Construction spending punked for the 10th month in a row as the housing sector train wreck skids further...

Personal income still negative, inflation rampant, spending declerating further.

Oh come on Nattering One the ISM had some good news?

Investors played "Johnny Can't Read" relying on the media spinsters who completely ignored the big shiny bold title on the report...

A look under the ISM covers shows inventories growing to their highest levels since 2001, prices sky rocketing and the manufacturing sector still in contraction...

Initial Claims 02/24 +7K to 338K vs prior 331K
Full Report

Inside the number: 4 week MA +7.5K to 335,250. Continuing claims +134K to 2.64 M, 4 week MA +24K to 2.54 M.

Of the "advertised" 7.5 M unemployed, 30% out longer than 15 weeks, 16% out longer than 27 weeks.

YOY Auto and Truck Sales Jan: GM +3.7%, DaimlerChrysler -8%, Ford -13.5%.

Inside the number: A 7.4% rise in truck sales, offset a -3.3% fall in car sales for GM.

Both GM and Ford announced CUTS in Q2 07 production by 5% and 14% respectively.

The durable goods report earlier this week showed a 33% drop in motor vehicle production.

All in all this translates into more pink slips as the dominoe effect goes through the automotive supply chain.

Construction Spending Jan -0.8% vs prior +0.6%
Full Report

Inside the number: Dec revised up from -0.4% to +0.6%, making this months drop even more ominous. Private residential construction projects -1.8%, following drops of 1.0% in Dec and 1.4% in Nov.

YOY Private housing expenditures -13%, residential construction -14.8%. The real tell:

In the 4 months since Sept 06 total residential construction spending has decreased 30.5%.

Commericial projects, healthcare, lodging and offices is where the money is going, but not enough to offset the drop in residential.

And these projects will just add to the glut of overcapacity as the economy slows further.

Get ready for some major pain when the latency in these numbers plays out in the supply chain over the next 9 months.

Personal Income Jan +1% vs prior +0.5%
Full Report

Inside the number: Core PCE Deflator +0.3% vs prior +0.2%, once again "advertised" inflation coming in at 2.4% annual...

proving that truncation of the leading digit as in 12.4% is the guvmint statisticians best friend.

Wow, a 1% jump in income for the "nouveau riche" on annual bonus payments and stock option gains.

All those cringing underlings, burger flippers, and service industry wage monkey types must be in hog heaven...


Ex-bonus and options the working stiffs real income +0.4%, but let us consider the increase in personal outlays which made personal saving NEGATIVE again.

Tack on the "advertised" inflation rate of 2.4%, wink-wink, nudge-nudge (in reality 12.4%) and the dollar debauchery...

If you are unlike the Tin Man, you get the picture, real income gains were NEGATIVE again...

Personal Spending Jan +0.5% vs prior + 0.7%

Out one side of the mouth... an economist for Morgan Stanley:

"some of the strength in consumer demand seen over the past couple of quarters has been attributable to temporary factors such as the retreat in gasoline prices and relatively mild weather." The Nattering One agrees...

Out the other side of the mouth... "solid job and income growth continue to provide the fundamental underpinnings for sustained momentum in spending."

Pass the pipe buddy, I want some of what your smokin... income has been NEGATIVE in real terms for quite some time and the job market has been heading south as well...

Tables 6 and 8 clearly demonstrate the guvmints statistical smoke and mirrors.

Table 6 Personal Income and Its Disposition (% change in annual rate): Non durable goods Q3 +3.9%, Q4 -2.2%

Note: Spending decelerated on across the board with the exception of services, Non durable goods fell off a cliff with a 6.1% negative swing...

Table 8 Real PCE by Product (% change in annual rate in DOLLARS): Non durable goods Q3 +1.5%, Q4 +6.0%

Note: The % change expressed in DOLLARS increased across the board, with Non durable goods expeditures going through the roof from 1.5% to 6%....

What does this tell us? Due to increasing prices, a disproportionate amount of disposable income went towards non durable goods, resulting in an overall cut back on non durable goods consumption but a rise in the dollars spent on them.

ISM Index Feb 52.3 vs prior 49.3
Full Report

Inside the number: New orders up to 52.3% vs 50.3%, production up to 54.1% vs 49.6%, employment up to 51.1% vs 49.5%.

An economist for Barclays Capital: "The report suggests that the inventory correction may be nearing an end and January may have been the bottom for the manufacturing sector,"

Did I miss something? or is this economist smoking from the same crack pipe as the guy at Morgan Stanley?

This months "increases" in production, orders and employment will prove to be a seasonal year end anomaly as well as media spin.

How can we tell? If you bother to READ the report, it clearly states in big bold letters "New Orders Growing, Production, Employment and Inventories Contracting and Deliveries Slowing."...

Price index up AGAIN to 59.0% vs 53.0%, producer inventories up AGAIN to 44.6% vs 39.9%, customer inventories up AGAIN to 53.0% from 52%, this is the highest level since January 2001.

Most manufacturer's have cut back production in an attempt to reduce inventories which keep growing. Why?

Because spending is decelerating and the economy is slowing, witness the automotive, manufacturing and housing sectors...

I can't wait for China's overcapacity deflation to really start hitting later this year... with all that bank, they can keep the factories crankin even in the red.

And they will, a hungry populace gets angry, fast.

Comments