Economy Struggling, Factory Output
Declines
Between the ricin mail and the Boston bombers, the news outlets have been
deluged with a lot of breaking news. But they missed a release that is going to
impact the economy, a decline in factory production in March.
At first glance the manufacturing report from the Philadelphia Federal
Reserve showed a mere decline of .1 percent in March after February's robust
report. But there were some inner details that portend trouble for manufacturing
which makes up almost one-eighth of the American economy and almost 65% of the
actual Gross Domestic Production not counted in the service sectors.
Factory capacity utilization, the report said, climbed to 78.5 percent, a
gain of .2 percent in the month-over-month comparison. If would figure American
manufacturing is recovering and that the decline is a minor hiccup, right?
No, that's what the Fed wants you to believe. Factory capacity continues to
decline in America, that is why the capacity number is going up. Factories are
closing, making America's ability to recover even tougher. It is the same trick
the government is using to disguise the true size of the unemployment ranks. By
removing non-working people from the count each month, they can keep the size of
unemployment down. Here, they lost capacity so capacity output went up even
while real output declined.
Worse for manufacturing was the auto industry showed a solid increase,
hitting a five-year high, in output meaning the decline was across a broader
spectrum than previously anticipated. Metal, computer, electrical equipment and
furniture manufacturing were hit hard in March.
There are two major items I track to keep tabs on the economy, jobs and
housing. Jobs are not forthcoming as much as the declining unemployment rate
would have people believe but the housing market seems to be rebounding as it
exceeded an annual pace of 1 million new units in March. Why then the steep
decline in furniture demand?
The problem in housing is the government has begun lumping all units
together. Where two decades past single family units led the way, today it is
apartment style units that are pushing the drive. Renters are less likely to
furnish the home as lavishly as a home owner--it is one of the points the Rant
has contended the economists are missing by adhering to the
Case-Schiller Housing Index. The housing market that disappeared is not the same
one they are measuring today, the paradigm has shifted. This manufacturing
report is supporting proof even if the economists continue to discount
the shift.
Putting another damper on the housing surge was homebuilder sentiment fell
for a third straight month. The builders are becoming increasingly depressed
over the rising costs of getting an affordable unit on the market because of
rising labor costs and problems with land because of heightened EPA involvement.
In essence, most would-be homeowners are being priced out of the market.
One last bit of bad news on the economic front. The International Monetary
Fund has lowered its 2013 growth rate forecast once again. The IMF dropped its
projections in November and December and January. It skipped February but
lowered the January forecast in March.
The Washington-based IMF now sees a global economy struggling as America's
recovery isn't gaining traction when government spending is factored out and the
Euro Union mess remains unresolved. The IMF cut its projection to 3.3 percent.
But, as the United States is still the world's leading economy and is showing
signs of slowing even more, expect that figure to be revised down in the coming
months.
The economists at the IMF dropped hints it is seeing a growth rate of but
1.2 percent for this year now and 2.2 percent for 2014.
Neither figure is enough to keep pace with population growth.
Without the ricin letters and without the Boston bombers the regular news
outlets might have delved into this story but that's doubtful. Still, the state
of the U.S. economy should be a concern to everyone, just not the people who
bring you the news.
"I have sworn on the altar of God eternal hostility
to every form of tyranny over the mind of man."--Thomas Jefferson
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