US IP: May Was A Good Month And It Was Still ‘Manufacturing Recession’

Whether or not a full-scale recession shows up in the US is an open question. There’s less of one in US industry. The “manufacturing recession” we last saw of Euro$ #3 is becoming clearer as a repeat property in Euro$ #4. According to the Federal Reserve, May was a relatively good month for industry – total output didn’t decline from April.

No matter in the big picture. The trajectory is becoming very well established. As is consistent with economic and market data from all over the world, “something” really went wrong around November 2018. Mainstream talk, when even admitting the possibility of weakness, continues to center on trade wars. The markets displayed the further decay of eurodollars.

It is the manufacturing sector which is leading the decline. While crude oil production continues to provide the only real boost, it isn’t enough to offset what is now six months, half a year of going the wrong way.

As the prior manufacturing recession, the production of consumer goods indicates the segment where imbalances are piling up. Consistent with GDP’s inventory estimates during the first quarter underlying the robust headline, the supply chain is starting to be pulled inward on itself. In days gone by, the classic recession pattern.

The Fed’s estimate for the production of consumer goods is falling at a sharp clip already, an annualized rate of more than 4% over these last six months.

The implications are pretty straightforward. Whereas retail sales are hanging in at around or a little less than 3% growth, that’s actually bad news if not yet recession news. As it had been in the past, it’s not nearly enough spending growth to keep the goods economy moving or even from contracting.

Increasingly negative production levels are the inevitable adjustment to first the falloff in consumer spending and then the manufacturing sector viewing that change as substantial or more than temporary. Most likely both.

1 2
View single page >> |

Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.
Gary Anderson 1 month ago Contributor's comment

If Powell wants to keep his job in the next administration he may have to tighten things up even though things are slowing. That would protect the integrity of the Fed, which is under attack by Trump, who would surely like to get rid of Powell if he gets reelected.

Cynthia Decker 1 month ago Member's comment

Likely true.