Tag Archives: Economy

U.S. Manufacturing Production Contracts For 7th Straight Month, Capacity Utilization Tumbles

After falling for 3 of the last 4 months, and following Germany’s disastrous January print, US Industrial Production was expected to drop by 0.2% but yet again it disappointed, falling 0.3% MoM.

This means US Industrial Production has contracted year-over-year for 5 straight months.

  • Utilities fell 4% in Jan. after falling 6.2% in Dec. (warm weather-related?)
  • Mining rose 1.2% in Jan. after rising 1.5% in Dec.

In the manufacturing segment, production slipped 0.1% MoM, matching expectations, but is down year-over-year for the seventh straight month…

Finally, we note that Capacity Utilization slumped to 76.8%.

And this is before the impact of the virus had fully hit global supply chains.

Source: ZeroHedge

Chicago PMI Plunges To Lowest In 4 Years

After slumping into year-end, Regional Fed surveys have (surprisingly) exploded higher this month with Richmond and Philly surveys spiking almost by the most on record.

Today’s Chicago PMI was expected to follow suit – though less excitedly – with a modest gain but instead it missed massively, plunging to its lowest since Dec 2015 – printing 42.9 vs 48.9 expectations.

Source: Bloomberg

This was the biggest miss of expectations since Dec 2015…

Source: Bloomberg

None of the underlying components rose in December:

  • Business barometer fell at a faster pace, signaling contraction
  • Prices paid rose at a slower pace, signaling expansion
  • New orders fell at a faster pace, signaling contraction
  • Employment fell at a faster pace, signaling contraction
  • Inventories fell at a faster pace, signaling contraction
  • Supplier deliveries rose at a slower pace, signaling expansion
  • Production fell at a faster pace, signaling contraction
  • Order backlogs fell at a faster pace, signaling contraction

Having tumbled by the most in 39 years last year, Chicago PMI has no been in contraction (sub-50) for 7 months in a row – something it has not done outside of recession… ever.

Source: Bloomberg

As a reminder Dec 2015 was the last time China’s economy was in free fall.

Source: ZeroHedge

Dallas Fed Contracts For 3rd Straight Month, Confirming Regional Survey Slump

The Dallas Fed conducts recurring surveys of over 900 business executives in manufacturing, services, energy, and AG lending across Texas and the broader Eleventh Federal Reserve District. The information collected is a valuable component of regional economic analysis.

Against expectations of a rebound to 0.0, The Dallas Fed Manufacturing Outlook survey disappointed in December, sliding from -1.3 to -3.2 – in contraction for the 3rd straight month…

The Dallas Fed survey has been in contraction for 7 months this year…

Under the hood was just as unimpressive with New Orders Growth rate contracting and Finished goods contracting along with the six-month outlook dropping further.

Dallas joins, Philadelphia, Kansas, Chicago, and Richmond in their regional weakness in December…

But, but , but, The Fed is on hold!?

Source: ZeroHedge

Rail Recession: U.S. Carloads Continue Collapse As Manufacturing Slows

Nowhere is the slowdown in the U.S. economy more obvious than in places like Class 8 Heavy Duty Truck orders and rail traffic. We already wrote about how Class 8 orders continued to fall in October and new data the American Association of Railroads (AAR) now shows that last week’s rail traffic and intermodal container usage both plunged.

The AAR reported total carloads for the week ended Nov. 9 came in at 248,905, down 5.1% compared with the same week in 2018. U.S. weekly intermodal volume was 266,364 containers and trailers, down 6.7% compared to 2018, according to Railway Age

One of the 10 carload segments that posted an increase YOY was grain, which was barely up 342 carloads to 21,855. Coal was down 9,577 carloads, to 75,180; miscellaneous carloads were down 843 carloads, to 10,944; and petroleum and petroleum products were down 741 carloads, to 12,617.

So far in 2019, railroads have reported total volume of 11,337,628 carloads, which is down 4.3% from the year prior. The year’s 11,988,234 intermodal units are down 4.6% for the year and total combined traffic was down 4.4% to 23,325,862 carloads. 

The numbers for North America in total were also lower. 

North American rail volume for the week ending November 9, 2019, on 12 reporting U.S., Canadian and Mexican railroads totaled 352,176 carloads, down 4.8% compared with the same week last year, and 352,712 intermodal units, down 6.5% compared with last year. Total combined weekly rail traffic in North America was 704,888 carloads and intermodal units, down 5.6%. North American rail volume for the first 45 weeks of 2019 was 31,852,518 carloads and intermodal units, down 3.4% compared with 2018.

Canadian rail traffic also crashed, down 5.5% with intermodal units down 5.9%. For the year, however, Canada has been the one North American country to edge out a gain on the year, with its cumulative traffic coming in at 6,824,664 carloads, up 0.4% on the year.

Mexican railroads were able to buck the broader trend, posting a slight increase in carloads for the week. 

Mexican railroads saw a slight uptick, as it reported 20,097 carloads for the week, up 2.8% compared with the same week last year, and 17,987 intermodal units, down 5.5%. Cumulative volume on Mexican railroads for the first 45 weeks of 2019 was 1,701,992 carloads and intermodal containers and trailers, down 2.7% from the same point last year.

We noted this rail recession in the U.S. in early October, citing the manufacturing collapse in the U.S., much of which is being blamed on the trade war, as the main culprit. 

What’s quite clear is that we’re not yet at a trough. Trains have not yet bottomed,” said Ben Hartford, an analyst with Robert W. Baird & Co. “We need to have some clarity in trade policy.”

We noted in October that the manufacturing recession is more widespread than the mid-cycle slowdowns in 2012 and 2015/16. The slowdown has been concentrated in manufacturing for well over a year, driven by a downturn in business investments in 2019. 

We noted last month that there is an indication that the downturn has spilled over into service sector output and employment.

Now, “there are no pockets of growth,” said Bloomberg Intelligence analyst Lee Klaskow, who said a “railroad recession” could be imminent in a recent report. “There’s really nothing that’s tapping me on the shoulder saying, ‘Hey look at me. I’m going to be your next growth engine.'”

Source: ZeroHedge

Business Conditions Are At Their Worst Since 2008 Financial Crisis, Says Morgan Stanley

The business environment is deteriorating — fast.


That is according to a gauge of business conditions tracked by Morgan Stanley, which said in a recent note that its proprietary Business Conditions Index, or MSBCI, fell 32 points last month, marking its sharpest collapse since the metric was formulated. The gauge touched its lowest point since the 2007-08 financial crisis. A separate composite business-condition index also fell by the most since 2008 and hit its lowest level since February of 2016.

Morgan Stanley’s report comes as stocks in June have mostly drifted higher in turbulent trading, with the Nasdaq Composite Index COMP, -0.52% entering correction territory on June 3, but gaining 6.3% since that point as of Friday morning trade, according to FactSet data.

Swirling anxiety around the U.S.’s trade relationship with China and other major international counterparts has hurt the confidence of business leaders because the unresolved tariff battles have made it difficult for corporate chieftains to develop business strategies and forced many companies to alter their supply chains.

Morgan Stanley said that its index also reflects an apparent slowdown in domestic jobs growth. Economists for the report, led by Ellen Zentner, wrote that the fall in business conditions is “consistent with the slowdown in gross hirings reflected in the latest employment report for May, and raising the risk that weakness in labor demand persists into next month’s report.”

Indeed, the U.S. created just 75,000 new jobs in May, well off consensus forecast for some 185,000 jobs created on the month, and potentially marking a significant change of momentum in what has been a pillar of strength in the domestic economy.

Morgan Stanley said that taken with other metrics that drill down deeper into financial conditions, “these indicators point to business expansion coming to a near halt in June.”

On Friday, the Dow Jones Industrial Average DJIA, -0.07% the S&P 500 index SPX, -0.16% and the Nasdaq Composite Index COMP, -0.52% were headed lower as Broadcom AVGO, -5.57% lowered its guidance for the rest of the year after reporting second-quarter earnings Thursday afternoon. Other chip-sector stocks were lower on the news as well.

Source: by Mark Decambre| Market Watch

Rollercoaster! Global Economic Growth (G10, US, Emerging) Sliding Down Together

The global economy is in a rollercoaster pattern.

And unfortunately the G10, US and Emerging nations are on the downward side.


This might explain Larry Kudlow’s call for a 50 bps drop in the Fed Funds Target Rate. At least Trump’s nominee for The Fed’s Board of Governors was previously the President of the Kansas City Federal Reserve. And CEO of Godfathers Pizza! Conditional on the US Senate approving his appointment, “Welcome to the party, pal!”

Source: Confounded Interest


This week in politicks…


Business Spending Suffers Longest Contraction Since 2015

After no January Durable Goods report as the government was shut down one month ago, today we got a double whammy of a Durables report, with both November and December data, and as many had warned, it was disappointing, rising just 1.2%, below the 1.7% expectations, if up from 1.0% in November (revised up from 0.7%).


However, much of the upside was once again due to transportation orders, read Boeing defense and airplane spending. Indeed, new orders for non-defense aircraft and parts soared 28.4%, by far the biggest contributor of December spending. Ex airplanes, under the hood things were even uglier:

  • New orders ex-trans. rose 0.1% in Dec. after 0.2% fall
  • New orders ex-defense rose 1.8% in Dec. after being unchanged

Most importantly for those following the buyback vs capex debate, non-defense capital goods orders ex-aircraft, i.e. core capex spending, fell 0.7% in Dec. after falling 1.0% in Nov (revised lower from -0.7%).

This was the third consecutive month of declines, the longest stretch of contraction since late 2015 when China nearly dragged the entire world into a recession and only the early 2016 Shanghai accord saved the world from what would have been a certain contraction.


Source: ZeroHedge