New orders for U.S.-made goods fell in April and shipments dropped by the most in two years, indicating continued weakness in manufacturing activity that could undercut the broader economy.A one-time March increase has showed up in several reports, and many of those gains have been taken back in April, which indicates that the 3.1% growth we saw in Q1 was more a fluke than any indication of underlying economic strength.
Factory goods orders declined 0.8%, pulled down by soft demand for transportation equipment, computers and electronic orders, and primary metals, the Commerce Department said on Tuesday. Data for March was revised down to show factory orders increasing 1.3% instead of surging 1.9% as previously reported.
Economists polled by Reuters had forecast factory orders would fall -0.9% in April. Factory orders rose 1.6% compared to April 2018. Manufacturing, which accounts for about 12% of the economy, is being squeezed by businesses placing fewer orders while working off stockpiles of unsold goods in warehouses.
The inventory bloat is concentrated in the automotive sector, which is experiencing weaker sales. Inventories at factories rose 0.3%. The stock of unsold goods has increased in seven of the last eight months.
Shipments of manufactured goods fell 0.5 percent 0.5% in April, the largest drop since April 2017, after rising 0.2% in March. Boeing's move to cut production of its troubled 737 MAX aircraft is also hurting manufacturing.
Manufacturing has notably weakened for 2019, and the construction sector might be doing even worse, as this report from Monday showed.
Total ConstructionNot only did private construction go down for April, but it’s down 6.0% in the last 12 months, and private residential construction (aka most homes and apartments) is down a stunning 11.4% in the last year. Overall construction has dropped by 1.2% ($16.1 billion) in that same time.
Construction spending during April 2019 was estimated at a seasonally adjusted annual rate of $1,298.5 billion, nearly the same as (±1.3 percent)* the revised March estimate of $1,299.2 billion. The April figure is 1.2 percent (±1.5 percent)* below the April 2018 estimate of $1,314.7 billion. During the first four months of this year, construction spending amounted to $386.1 billion, 0.2 percent (±1.3 percent)* above the $385.5 billion for the same period in 2018.
Private Construction
Spending on private construction was at a seasonally adjusted annual rate of $954.0 billion, 1.7 percent (±1.0 percent) below the revised March estimate of $970.4 billion. Residential construction was at a seasonally adjusted annual rate of $499.3 billion in April, 0.6 percent (±1.3 percent)* below the revised March estimate of $502.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $454.7 billion in April, 2.9 percent (±1.0 percent) below the revised March estimate of $468.0 billion.
The only thing keeping construction and its related jobs from a collapse is a significant rise in public work, which has gone up more than $47 billion since December, with $26.5 billion of that in highway and street work.
In fact, for all the GOP spin on “3% growth”, there has only been 1 quarter of private-sector GDP growth above 3% since the middle of 2017. But when government is adding 0.4-0.5% of growth every quarter, it becomes easier to have a growing economy. Somehow, I’m not thinking you’ll see Republicans talking up “big government spending” as a reason the allegedly improved economy.
And then don’t forget about what the bond market has been indicating, with the benchmark 10-year note diving by 47 basis points in a month, as investors bailed out of stocks (the S&P dropped 7% in the same time period) and locked in a rate of return. That led to a growing and significant interest rate inversion, a situation that has predicted every recession over the last 30+ years.
As the Inversion of the #YieldCurve becomes more pronounced, many wonder whether this is a good predictor of an upcoming #recession ? Check out my piece at @EconoFactOrg https://t.co/fjsUrdnGq9 https://t.co/mX6mfbX7Dr
— Michael W. Klein (@MKleinEF) June 4, 2019
So with all the negative economic news, why did the DOW Jones go up more than 500 points on Tuesday? Because things are so shaky that the Federal Reserve might have to step in to stop the bleeding.
On Tuesday, Fed Chair Jerome Powell said the central bank would respond “as appropriate to sustain the expansion” amid current concerns weighing on the economy, including the global trade war.Which means we are set up to be in the weird situation where coked-up Wall Streeters likely will be rooting against a good jobs number on Friday, because good news on jobs and wages means the Fed can hold off longer on cutting rates from their already-low levels. The Bubble Boys never stop, do they?
“To be sure his comments are vague, but I think it’s safe to say this is the first time Powell himself has opened the door to an actual rate cut. Given the ongoing uncertainty on the both the interest rate and trade front, any clarity will likely be welcomed by the market,” Mike Loewengart, vice president of investment strategy at E-Trade Financial Corporation, said in an email. “A lot of market watchers will be reading the tea leaves from this week’s jobs data, which could hold significant weight for the Fed’s next rate move.”
Powell’s remarks come amid a month of trade-related financial market volatility, softening domestic economic data and below-target inflation signals. Earlier this week, St. Louis Fed President James Bullard suggested these factors may provide justification for a cut to key interest rates “soon.”
The problem is, the fundamentals in several areas of the Main Street economy are already weak, and dropping interest rates to encourage more borrowing and gambling on stocks and other assets seems like something that will make our already-tenuous situation even worse in a couple of years. But when has long-term thinking and sustainable growth ever been part of the mindset that dominates Wall Street and today’s GOP?
After nearly 10 years of relatively steady economic growth, it sure feels like things are about to get a lot bumpier, doesn’t it?
"The only thing keeping construction and its related jobs from a collapse is a significant rise in public work, which has gone up more than $47 billion since December, with $26.5 billion of that in highway and street work."
ReplyDeleteOne of the most effective ways for state government to stimulate economic growth is to "set the table," that is, to create the conditions that enable the private sector to flourish.
That does NOT mean indulging any trickle-down delusion that shoveling money into the pockets of the state's one-percenters will ultimately benefit ordinary Wisconsinites. That is the delusion Walker foisted on low-information voters, and it's a delusion the state GOP still broadcasts with knee-jerk regularity.
Instead, when state government makes long term investments in roads, education and infrastructure, prosperity follows.
The failure-factory known as the WEDC keeps proving that targeting manufacturers with gob-smackingly misspent taxpayer dollars is exactly the wrong way to promote economic growth inside the state's borders.