June 2, 2015

Factory Orders ‘Unexpectedly’ Fall Again; Press Fails to Note Steep Year-Over-Year Declines

This morning’s April factory orders report from the Census Bureau showed yet another seasonally adjusted decline. This time, they fell 0.4 percent, seriously underperforming expectations that they would come in flat.

This naturally brought forth another sighting of the U-word (“unexpectedly”), this time at Reuters. Both Reuters and the Associated Press failed to note how steep the year-over-year declines in orders — and for that matter, shipments — have become:

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NewsBusted (060215)

Filed under: NewsBusted — Tom @ 8:33 am

Here we go:

Topics:
– America Divided
– ISIS
– President Obama
– Obama Library
– MSNBC
– Football’s Justin Smith
– Jimmy Carter
– American Idol

Best Line: “In April, MSNBC had its lowest ratings in 10 years. To give you an idea of how bad it is, the network is changing its slogan from ‘Lean Forward’ to ‘Spiral Downward.’”

The Economy Has No Clothes

Filed under: Economy,Taxes & Government — Tom @ 6:59 am

So they further define down the “new normal.”

____________________________________

This column went up at PJ Media Saturday evening, and was teased here at BizzyBlog on Sunday morning.

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On Friday, the government’s Bureau of Economic Analysis reported that the nation’s economy contracted at an annual rate of 0.7 percent during this year’s first quarter, a sharp drop from the barely positive 0.2 percent it estimated a month ago.

Ignoring for now the current absurd allegations that Friday’s reported decline overstates how bad things are because the BEA must not be properly performing its seasonal adjustment calculations — a matter I will address in my next column — I’m more than a little surprised that the contraction wasn’t worse.

Many key components of what the nation’s Gross Domestic Product truly is — “the (real) value of the production of goods and services in the United States” — turned in seasonally adjusted first-quarter results far below those seen last summer and fall. In certain key instances, the first quarter of 2015 actually came in below the far more winter-ravaged first quarter of 2014, effectively reversing all of the growth occurring during the quarters in between.

A few examples follow; all dollar amounts presented are in millions of current dollars. Remember that the government’s reported 0.7 percent contraction is annualized, meaning that the raw decline during the quarter was roughly one-fourth of that figure, or 0.17 percent.

Retail Sales. The government has been especially notorious for initially presenting rosy figures for this metric and subsequently revising them down, often significantly. Hence, many readers likely believe that seasonally adjusted retail sales have been on a continual upward trend. It isn’t so:

RetailSales4QsEnded1Q15

The effect of the first quarter’s 1.16 percent decline from last year’s final quarter is roughly 4.5 percent on an annualized basis. This is what happens when household income is still in the pits and job growth is disproportionately in part-time and low-wage work.

Manufacturing Orders and Shipments. The carnage has been truly awful in these two key areas:

MfgOrdersAndShipmts1Q13and1Q14and!q15

As calculated above, 1Q15 orders and shipments were both well below last year’s first quarter. They also trailed last year’s fourth quarter, and even the first quarter two years ago. It’s hard to see how all of this can be happening in a genuinely growing economy. The annualized contraction in shipments based on the 4Q14 to 1Q15 decline is a shocking 11.6 percent.

Construction spending. This component, presented in annualized amounts, fell by almost 1 percent during the first quarter from last year’s fourth quarter, or about 3.6 percent on an annualized basis — over five times the economy’s reported overall drop:

ConstSpending1Q15vs4Q14

By contrast, last year’s first-quarter construction spending decline, during a much more brutal winter, was less than 0.2 percent (0.64 percent annualized).

Even if Friday’s reported GDP contraction is accurate, the factors I have cited here should be cause for serious concern going forward.

There’s an additional worrisome item: inventories.

In September 2009, shortly after the recession’s official end, seasonally adjusted total business inventories troughed at $1.31 trillion. In the subsequent 5-1/2 years, they have shot up by over $450 billion, or more than one-third. Inventory growth has been responsible for about 14 percent of all current-dollar growth in GDP during that time.

Inventories are also 16 percent higher than their mid-2008 peak. Inflation only explains half of that increase. They are even further above where they were in 2006 and 2007, the last time the economy could fairly have been described as prospering.

It’s highly unlikely that inventory growth can continue at its post-recession pace, especially considering the sharp drops in orders and shipments noted above, even if the Federal Reserve doesn’t touch interest rates this year. If rates do go up, inventory holding costs will increase significantly, which could also contribute to a decline.

Last year, contrary to expectations, frankly including mine, the economy turned in strong second and third quarters after contracting sharply during the first. This year, the chances of that happening again appear to be far lower.

Many economists and analysts have revised their original estimates of second-quarter growth dramatically downward. As of May 26, the Atlanta Branch of the Federal Reserve, whose GDP model based on the data available in late April almost exactly nailed the government’s original positive 0.2 percent first-quarter growth estimate, projected that the second quarter will come in at an annualized 0.8 percent. As of Friday, even the incorrigible Keynesians at Moody’s were predicting only 1.5 percent.

You might expect that policymakers and pundits would be looking into why the economy continues to crawl along at subpar speed and occasionally contract, which has now happened three times since the recession’s official end. Dream on. In addition to the whining about seasonal adjustments noted earlier, they’re also declaring that the U.S. economy simply can’t grow any faster, no matter who’s in charge and no matter what their public policy prescriptions are.

Late last week, Goldman Sachs told its clients that it had revised its “potential GDP growth estimate” down by a half-point from an already unacceptable 2.25 percent to an annualized 1.75 percent, citing two apparently incurable factors: “a slower rate of productivity growth in the private sector vs. the historical average in the future,” and sluggish labor force growth.

So it would now appear that any performance which meets or exceeds this pathetic new benchmark will now merit hosannahs. We’re supposed to forget that from the 1983-2007, the quarter-century which was primarily propelled by Reaganomics instead of being ushered into calamity by Keynesians, economic growth came in four times higher once (7.3 percent in 1984), met or exceeded 4 percent nine times, and topped 3 percent 16 times.

Thanks to this lowering of the bar, it would now appear that the Obama economy, with its average annual growth of 2.2 percent during the past five post-recession calendar years, all of a sudden is supposed to be accepted as just fine, and the best we can ever hope to do.

What rubbish.

Tuesday Off-Topic (Moderated) Open Thread (060215)

Filed under: Lucid Links — Tom @ 6:05 am

This open thread is meant for commenters to post on items either briefly noted below (if any) or otherwise not covered at this blog. Rules are here.

Positivity: On feast of the Holy Trinity, Church celebrates ‘love of the living God’

Filed under: Positivity — Tom @ 6:00 am

From Vatican City:

May 31, 2015 / 12:52 pm

In the revelation of the Holy Trinity, God shows the Church his selfless love and unity that we are called to foster in our own communities, Pope Francis said in his Sunday Angelus address.

“The Trinity is a communion of divine persons who are one with the other, one for the other, one in the other: this communion is the life of God, the mystery of the love of the living God,” the Pope said in his May 31 address.

Like the Trinity, “we are called to live not one without others, above or against others, but one with others and in others,” he said.

Francis spoke to roughly 50,000 pilgrims who were gathered in St. Peter’s Square to hear his address on the feast of the Holy Trinity, which the Church celebrates in honor of her teaching that there is one God expressed in three Divine Persons.

In his address, the Pope noted that it was Jesus himself who revealed the Trinity to us when he spoke of God the Father and the Holy Spirit, and when he referred to himself as the Son of God.

When he appeared to the disciples after he had risen from the dead, Jesus told them to evangelize, baptizing people “in the name of the Father and of the Son and of the Holy Spirit,” the Pope observed.

He explained that this “missionary mandate” didn’t end with the disciples, but has been passed on to the Church in every age.

The Church’s liturgical feast celebrating the Triune God serves as a moment of reflection on not only the “stupendous mystery” from which we came, but also of where we are going, the Pope said.

Since we were created by this God the feast is also a renewal of our mission to live in communion with God and with one another, Francis continued, explaining that this communion must be based “on the model of the trinity.” …

Go here for the rest of the story.

Positivity: Renowned author, uncompromisingly Catholic — Flannery O’Connor chosen for new postage stamp

Filed under: Positivity — Tom @ 6:00 am

From Washington:

May 30, 2015 / 06:01 am

Award-winning American author and devout Roman Catholic Flannery O’Connor will appear on a new postage stamp this summer, the U.S. postal service announced last week. The stamp is decorated with peacock feathers, a tribute to the family peacock farm in Georgia where O’Connor did much of her writing.

Famous for her Southern Gothic fiction style, O’Connor’s best-known works include her first novel, “Wise Blood”, and many short stories such as “A Good Man is Hard to Find.” A collection of her works, “The Complete Stories of Flannery O’Connor,” won the 1972 National Book Award for fiction and was named the Best of the National Book Awards, 1950-2008 by a public vote.

The author was born in 1925, the only child to devout Roman Catholic parents living in the heart of the Protestant “Bible Belt” in Savannah, Georgia. O’Connor went to school at Georgia State College for Women, then to the Iowa Writers Workshop, and finally to New York to study and work on her writing.

However, at the age of 25, a diagnosis of lupus forced O’Connor to return home to her family’s farm in Andalusia, Georgia, where she lived out her days caring for animals, going to church, and writing.

Her inclusion on U.S. postage stamps is a triumph for both American authors and American Catholics, said Ralph Wood, professor of literature and theology at Baylor University and author of the 2005 book “Flannery O’Connor and the Christ-Haunted South.”

“More than 50 years after her early death in 1964 (at age 39), her fiction continues to command worldwide attention, and so the USPS rightly adds her to its roll-call of writers who have been thus honored,” Wood told CNA in an e-mail interview.

“Yet it would be tempting on such a public occasion to ignore the religious nature of Flannery O’Connor’s achievement,” Wood added.

But this can hardly be done. O’Connor never kept her faith a secret, and despite her frail health would travel to speak about faith and literature.

The recent release of her college prayer journal, which she kept while attending the Iowa Writer’s Workshop in her early 20s, provides even more evidence that the author’s deep interior life and relationship with God drove her passion for writing.

“Dear God please help me to be an artist, please let it lead to You,” she wrote. …

Go here for the rest of the story.